The majority of this article comes from GotQuestions.org.
Sanctification is God’s will for us (1 Thessalonians 4:3). The word sanctification is related to the word saint; both words have to do with holiness. To “sanctify” something is to set it apart for special use; to “sanctify” a person is to make him holy. Jesus had a lot to say about sanctification in John 17. In verse 16 the Lord says, “They are not of the world, even as I am not of it,” and this is before His request: “Sanctify them by the truth; your word is truth” (verse 17). In Christian theology, sanctification is a state of separation unto God; all believers enter into this state when they are born of God: “You are in Christ Jesus, who became to us wisdom from God, righteousness and sanctification and redemption” (1 Corinthians 1:30, ESV). The sanctification mentioned in this verse is a once-for-ever separation of believers unto God. It is a work God performs, an intricate part of our salvation and our connection with Christ (Hebrews 10:10). Theologians sometimes refer to this state of holiness before God as “positional” sanctification; it is the same as justification. While we are positionally holy (“set free from every sin” by the blood of Christ, Acts 13:39), we know that we still sin (1 John 1:10). That’s why the Bible also refers to sanctification as a practical experience of our separation unto God. “Progressive” or “experiential” sanctification, as it is sometimes called, is the effect of obedience to the Word of God in one’s life. It is the same as growing in the Lord (2 Peter 3:18) or spiritual maturity. God started the work of making us like Christ, and He is continuing it (Philippians 1:6). This type of sanctification is to be pursued by the believer earnestly (1 Peter 1:15; Hebrews 12:14) and is effected by the application of the Word (John 17:17). Progressive sanctification has in view the setting apart of believers for the purpose for which they are sent into the world: “As you sent me into the world, I have sent them into the world. For them I sanctify myself, that they too may be truly sanctified” (John 17:18–19). That Jesus set Himself apart for God’s purpose is both the basis and the condition of our being set apart (see John 10:36). We are sanctified and sent because Jesus was. Our Lord’s sanctification is the pattern of and power for our own. The sending and the sanctifying are inseparable. On this account we are called “saints” (hagioi in the Greek), or “sanctified ones.” Prior to salvation, our behavior bore witness to our standing in the world in separation from God, but now our behavior should bear witness to our standing before God in separation from the world. Little by little, every day, “those who are being sanctified” (Hebrews 10:14, ESV) are becoming more like Christ. To summarize, “sanctification” is a translation of the Greek word hagiasmos, meaning “holiness” or “a separation.” In the past, God granted us justification, a once-for-all, positional holiness in Christ. Now, God guides us to maturity, a practical, progressive holiness. In the future, God will give us glorification, a permanent, ultimate holiness. These three phases of sanctification separate the believer from; the penalty of sin (justification), the power of sin (maturity), and the presence of sin (glorification).