You are the light of the world. A city set upon a hill cannot be concealed; 15 nor do they light a lamp and place it under the measuring-basket but on the lampstand, and it shines for everyone in the house. 16 So let your light shine before the people that they may see your good works and glorify your father who (is) in the heavens.
The idea that Israel, as the servant of the Lord, would be a ‘light for the nations’ is found in Isaiah (42:6; 49:6; 60:3). The argument in these chapters is that YHWH will act justly with respect to his alienated people, delivering them from oppression, restoring them to wholeness, and by virtue of this act of salvation redeemed Israel will be a light to the nations. Their existence as a transformed community is a sign to the world that God is intervening to deliver his people from oppression, from the consequences of judgment, and to restore his servant Jacob. In narrative terms it is not so much what the disciples do that constitutes a light to the nations but what God does (cf. Is. 51:5 LXX).
In this context the ‘good works’ of the disciples contrast with the evil ‘works’ of unrighteous Israel (cf. Is. 3:11, 24; 29:15; 59:6; 65:7; 66:18 LXX). But we also need to take into account Jesus’ insistence that the righteousness of the disciples must exceed that of the scribes and Pharisees (Matt. 5:20). My argument would be that he expressly sets this requirement of ‘good works’ in accordance with the Jewish law in a restricted eschatological framework: the law will be in force for the disciples until ‘heaven and earth pass away’, until ‘all is accomplished’ (5:18). The allusion here is to Isaiah 65:17; 66:22: the renewal of heaven and earth is a metaphor for the restoration of Israel. The call is for the disciples to manifest the righteousness of the covenant with Moses (‘good works’) as a sign to the nations (not least Rome) that God is redeeming his people until the full process of transformation is completed.