Premillennialism as a system is primarily based on a literal method of biblical interpretation. The main premise of premillennialism is that Jesus will literally return to the earth before (pre) the millennium begins and that He himself will inaugurate and rule over it. Premillennialists can be divided into two groups with respect to their central approach to the prophetic Scriptures, historic premillennialists and dispensational premillennialists. The basic difference between the two is the emphasis that each gives to the nation of Israel during the millennium, the period of a thousand years during which Christ will reign on earth (see Revelation 20:1–7).
Historic premillennialists believe that scriptural prophecy, especially the passages in Daniel and Revelation, give the entire history of the Church in symbolic form. Thus, they look into the Church’s past and present to find prophetic fulfillment and to see where they are in God’s prophetic timetable. Most historic premillennialists hold that the nation of Israel will undergo a national salvation immediately before the millennium is established, but there will be no national restoration of Israel. Thus, the nation of Israel will not have a special role or function that is distinct from the Church.
In contrast to historic premillennialism, dispensational premillennialism has gained popularity among modern evangelicals. Dispensational premillennialists hold that the second coming of Christ, and subsequent establishment of the millennial kingdom, is to be preceded by a seven-year-long period known as the “Tribulation,” the earthly activity of the Antichrist as well as the outpouring of God’s wrath on mankind. Dispensational premillennialists hold that the nation of Israel will be saved and restored to a place of preeminence in the millennium. Thus, Israel will have a special function of service in the millennium that is different from that of the Church or saved Gentiles.
Another difference is that most dispensational premillennialists hold that the millennium is for a literal 1000 years, while some historic premillennialists assert that the 1000 years is figurative for a long period of time. Basically, the fundamental difference between historic premillennialism and dispensational premillennialism consists in the latter’s insistence on maintaining a distinction between the nation of Israel and the Church. According to dispensationalists, the millennium will be a period of history in which God reverts back to fulfilling His Old Testament promises made to ethnic Israel, after this modern “Church Age” in which we live today is concluded. As such, the millennium will be a state of Jewish dominion over all the world, along with a newly restored Jewish temple and priesthood.
The Christians who reign with Christ will all have been given eternal, glorified bodies, and will reign spiritually, while the Jews will own the world physically, and will live, marry, and die (although evincing incredible longevity), just as people have throughout the history of the world. It is only after this thousand-year period, in which God fulfills His promises to ethnic Israel, that Christ will put down a final rebellion and usher in the eternal state with its New Heaven and New Earth (Revelation 21–22).
Historic premillennialism, conversely, requires none of this strict dichotomy between God’s spiritual people, the Church, and His physical people, ethnic Israel; it merely looks ahead to a time when Christ will reign visibly on the earth, before He brings in the eternal state.
 Got Questions Ministries. (2010). Got Questions? Bible Questions Answered. Bellingham, WA: Logos Bible Software.