Point 2 in a larger article discussing what the phrase "righteousness of God" means in Romans 1:17 does and does not mean.
Another opinion, much more common than the former, is that the righteousness of God denotes an inward righteousness, on the ground of which, whether it is already perfect or not, God pronounces men righteous by a judicial sentence. This is the interpretation given by Meander, Olshausen, and others; and it is still accepted by not a few believing men in various churches, though not to the same extent as formerly Lipsius,* in his treatise on the Pauline view of justification, contends that the word never refers merely to an objective relation, but always to an inward condition as well, sometimes delineated in its principle, and sometimes in its future perfection. We must do these writers the justice to state, that by this they do not mean a justification by works. While they interpret it as the inner righteousness which God works, and represent it as so pleasing to God, that on account of it He pronounces men righteous, though not yet completely perfect, they avoid the abyss of legalism, and lay stress on the faith which unites us to the person of Christ as the Life. This view has everything in common with the doctrine of Augustine and the Jansenists on the same subject; drawing a distinction between a man’s own righteousness (Phil. iii. 9), as undertaken in the exercise of his unaided powers, and that which is “of God,” interpreted as meaning produced by divine grace. This, they think, is the import of the expression “the righteousness of God.”
* Die Paulinische Rechtfertigungslehre, von Dr. Lipsius, Leipzig 1853.
But the antithesis between our own righteousness and that which is called the righteousness of God is different. It is between that which is subjective (our own) and that which is objective (God’s.) The opinion we are controverting, though different from legalism, and speaking of salvation by faith, is at variance with the Pauline doctrine, as will appear by two considerations. (1.) The objective relation expressed by the term stands out in bold relief when we consider the peculiar antithesis between Christ made sin for us, and believers made the righteousness of God in Him (2 Cor. v. 21). These words intimate that, in the same sense in which Christ was made sin—that is, objectively and by imputation—in that sense are His people made the righteousness of God. Nor is the sense different in another passage, where the apostle contrasts the going about to establish a personal righteousness, and submitting to the righteousness of God (Rom. x. 3); or when he declares that he wishes to be found in Christ, not having his own righteousness, but the righteousness which is of God (Phil. iii. 9). It cannot be alleged that the antithesis in the latter passage is between works of nature and works of grace, works of law and works of faith. (2.) It obliterates the distinction between the person and the nature and the standing in the first or second Adam, with which the whole Scripture is replete. It confounds righteousness and life, which are ever carefully, the one being the way to the other. This is conclusive against the interpretation, if we would abide by the apostle’s use of language, and not efface his express distinctions.