But it is not as though the word of God has come to nothing. For they are not all Israel, that are of Israel. Neither, because they are Abraham’s seed, are they all children. But, “In Isaac will your seed be called.” That is, it is not the children of the flesh who are children of God, but the children of the promise are counted as a seed.
Some people may try to say that God did a bad job of selecting a “chosen people” since most of them decided to not accept their Messiah. Paul addresses this issue here by saying
that not all of the people who were born of Israel were actually Israel in their hearts. I want to make it clear that I believe that Paul is talking only about the Jewish people here. He talks about the Gentiles later on, but here, I believe he is only discussing the Jews.
When Paul talks here he assumes you know your Jewish history. It is important to notice that Abraham had two sons and one of them was Isaac. Isaac had two sons too and one of them was Jacob who was renamed by God to be Israel. Since Paul says that the real Jews come from Isaac and not from Jacob, it tells us that he is speaking symbolically because everyone who was physically born of Jacob (Israel) was also from Isaac!
We also know that he was speaking symbolically because he was talking about children of flesh and children of promise. You will find more about this same symbolism in Galatians, chapters three and four. It is worthwhile to check what I am saying with what is said there. Paul makes a distinction that only those Jews who accept the promised Messiah are true Jews. The rest are not, and are cut off. You only understand this, though, by following the history of Abraham and his sons.
The story of Abraham and his two sons is found in the book of Genesis, chapters 17 and 21. You will see that God cast out Ishmael and did not allow Abraham to recognize him as the child He promised to him. Only Isaac was chosen by God. Ishmael was a human idea and done by human will and strength. God still blessed them however. I highly recommend you read the Genesis passage to get a better idea of what Paul is saying in this part of Romans.