Theocracy means rule by God.

"The realization of such an idea was only possible within the sphere of what is known as special revelation. Indeed, special revelation of the divine will, through divinely-chosen organs, to Divinely appointed executive agents, is, itself, the very essence of the idea of a theocracy." (International Standard Bible Encyclopedia)

Divine choice and power to rule is self-evident in Israel's history. At the Burning Bush God sends Moses to lead the Israelites out of Egypt and at Sinai the Covenant is made with them whose basic law became the Ten Commandments. Moses before his death consecrated Joshua as his successor as priest and ruler as he was.

As the twelve tribes settled in the Land of Canaan, God's will was made known to them by its Judges and High Priest. In one instance we see Gedeon, a judge in Israel, refusing to accept kingship from the people saying, "I will not rule over you, neither shall my son rule over you. The LORD must rule over you" (Jgs 8:23) Eventually they demanded to be ruled by a king. Samuel was opposed to this but was directed by God to anoint Saul as king. It was God who chose Saul to be their first king. David realized this and prevented his men from killing Saul on a day when they found him asleep in a cave. He said to his men, "The LORD forbid that I should ... lay a hand on him, for he is the LORD'S anointed." (1Sm 24:7)

Here also we see the separation of powers: the power of the king is separate from the the power of the priest. One Day Saul had assembled his army to fight the Philistines. It was usual before a battle to offer a sacrifice but Samuel delayed in coming into the armed camp and Saul's men began to slip away from the army. So, Saul, the king, decided to offer the Sacrifice himself. Just after Saul had finished offering the sacrifice Samuel arrived and told him that because of this his kingdom would be taken away from him. (1Sm 13)

Despite separation of powers,

we can see that the power to rule

comes from God.

A true theocracy in which God involved himself directly in order to prepare the world for the advent of his Son entering history could only happen once.

When Pilate asked Christ if he was a king, He answer that he was but his kingdom was not of this world. Now Church and State have separate powers but most work in harmony because the destiny of man is one -- the Kingdom of God.

Source of Human Ruling Power