Mark Lauterbach of Gospel Driven Life has an excellent post on hypocrisy and the gospel. As someone who struggles with hypocrisy, I found his comments very insightful and helpful. He writes:

Jesus spoke severely against hypocrisy. I think there is one reason—we cannot be committed to creating a false impression of our goodness with others and simultaneously admit we are sinners before God. The Gospel destroys hypocrisy and frees us from the burden of being phony.
Jesus said we cannot have it both ways—if we live to win the respect and good opinion of others, then we have our reward—but God will pay us no heed. We cannot serve to masters. Whose approval do I seek? Whom do I wish to impress?
Why are we tempted to play the hypocrisy game? When it comes down to it, it is not because we do not want to bother other people with our own mess. It’s because we don’t want people to see us as we actually are, namely, as people who struggle—sometimes intensely—with lust, anger, pride, worry, etc. When we give into hypocrisy we can be sure that we are finding our identity in how we want people to perceive us in what we do or don’t do rather than finding it in the gospel, that is, in God’s saving action toward us in the Messiah. Mark continues:
If I am afraid to let others see the reality of sin in my life, my marriage, my children—it is because I am a slave to the god of “the esteem of man” and that god is a cruel tyrant. I have watched sin gain strength in my life and in the lives of others because they were too committed to their good image. Marriage conflicts became roots of bitterness—resistant children became hard hearted rebels—occasional lust became “addiction” to pornography—all because they are more committed to their image than to the truth about their sin in the presence of the Savior and his people.
What frees us from being a slave to hypocrisy? You know what I’m going to say don’t you? The Gospel. Only the gospel tells us both what we don’t want to hear, namely, that we are more idolatrous and sinful than we’ve ever thought, and also what we desperately want to hear, namely, that we are loved with an everlasting love, at the same time. If, on the one hand, I’m only confronted with my sinfulness, I will play the cover-up game of hypocrisy. Why? Because not only will I not be able to handle seeing myself as I really am, I won’t be able to handle others seeing me as I really am. If, on the other hand, I’m constantly assured of God’s love for me without also being confronted with the depth of my sinfulness, I will play the same cover-up game. Why? Because an awareness of my sin will make my sense of God’s love for me evaporate in an instant.
Only when we are confronted with the depth of our sinfulness and the magnitude of God’s love for us at the same time will we be able to step away from the hypocrisy game. The gospel alone is the one thing that faces us with those two truths simultaneously. Only in the gospel are we freed to let people get an accurate picture of what’s going on in the inside. So what must we do? Continually preach the gospel to ourselves and surround ourselves with people who will daily preach the gospel to us. Hypocrisy cannot survive in a gospel-centered community.
**See Mark’s entire post here.