Baptist fundamentalists very frequently quote this verse but they very seldom, if ever, quote it in context creating an erroneous interpretation of it. In all of Ephesians chapter two Paul is teaching the Gentile believers in Christ that although they are called “the uncircumcision” by the Jews, Christ Jesus has “broken down the dividing wall, that is, the hostility” between the Gentiles and the Jews having in his flesh made both groups into one. Therefore, the Gentiles have no need to be circumcised or to keep the Law in order to be saved. Indeed, they have been saved through faith rather than by being circumcised and keeping the Law and performing the works required in the Law.
Therefore, Ephesians chapter two is not a polemic against the need to do what is good; it is a polemic against the need to be circumcised and to perform the works required in the Law. Indeed, Paul uses the word circumcision 23 times in 20 verses. Furthermore it is not a polemic against what James taught, “You see that a person is justified by works and not by faith alone,” but rather the teaching of James is a polemic against the denial of human responsibility.