By the Grace of God (Latin Dei Gratia, abbreviated D.G.) is an introductory part of the full styles of a monarch taken to be ruling by divine right, not a title in its own right.
For example, according to the "Royal Proclamation reciting the altered Style and Titles of the Crown" of May 29, 1953, Elizabeth II's full title is "Elizabeth II, by the Grace of God, of the United Kingdom of Great Britain and Northern Ireland and of Her other Realms and Territories Queen, Head of the Commonwealth, Defender of the Faith"; in the various other Commonwealth Realms, variations are used, specifying the realm in question and varying some of the other elements of the title.
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Originally, it had a literal meaning: the divine will was invoked—notably by Christian monarchs—as legitimation (the only one above every earthly power) for the Absolutist authority the monarch attempted to maintain. This is also known as the divine right of kings, that is, the endorsement of God to the monarch's reign.
In the Behistun Inscription high over the road connecting Babylon and Ecbatana, the capitals of Babylonia and Media, the Achaemenid Persian King of Kings Darius I the Great had inscribed, in the Old Persian, Akkadian and Elamite languages:
Then he had the ledge chipped away which supported the stonemasons, so passing travellers could read the inscription.
As in Antiquity it was quite common for pagan deities to be equated with each other and/or adopted by conquerors in their pantheon, the fact that 'god' was often another deity was no objection for passing on devotional styles or even legitimation. Thus "King by the grace of God" passed from the Persian monarchy to the Hellenistic heirs of the Greco-Macedonian conqueror Alexander the Great, and was taken up by the later Roman emperors, who ultimately Christianized it when adopting Christianity as the new official religion. And so it passed into Europe, eased by passages in the Bible that refer to God allowing Earthly events and from mild to direct forms of divine appointment.
While the Christian Roman emperors during the late Dominate, especially in the East (as continued in Byzantium after the fall of Rome), came remarkably close to acting out the role of God's voice on earth, centralizing all power in their hands, e.g. reducing the Patriarch of Constantinople to their "(State) Minister of the Cult" and proclaiming their "universal" authority (in the Oriental tradition, as in Persia, but also in the original Muslim Caliphate), for most dynasties it would rather prove to be a never-ending battle up the hills of political resistance, both from rival power poles within their state (nobility, clergy, people; even within a dynasty) and from foreign powers claiming independence or even hegemony, usually constraining them in constitutional limitations (not necessarily written statutes, more often a matter of customary law and established privileges).
By custom, the phrase "by the Grace of God" is restricted to sovereign rulers; in the feudal logic, a vassal could not use it, because he held his fief not by the grace of God almighty, but by grant of a superior noble, (in)directly from the crown. Yet this did not stop kings to continue using it, even when some of them did homage to the pope (as viceregent of God) and/or (an)other ruler(s) (sometimes even mutually), on account of some (minor or 'external') fief, or even for their actual principality, such as the many belonging to the Holy Roman Empire.
While the "incantation" of divine Grace became a prestigious style figure that few Christian monarchies could resist, it is not a literal carte-blanche from Heaven, but rather a consecration of the "sacred" mystique of the crown. Some of that survives even in modern constitutional monarchies and finds expression in most even mildly religious republics and dictatorships, where all power has been transferred to elected (party) politicians. In modern, especially recently (re-)founded monarchies, more realistic power reports (often crucially a voice in the succession and the purse strings) do in time find expression, sometimes even in abandoning "By the Grace of God", or rather, especially earlier, in the intercalation of compensatory phrases, such as "and the will of the people", and/or replacing the genitive "sovereign of X-place" by "sovereign of the X-inhabitants", quite meaningful where linked to the Enlightenment-notion of the "social contract", which means the nominal 'sovereign' is in fact potentially subject to national approval, without which a revolution against him can be legitimate.
Today, even though all western monarchies are constitutional, all political power having passed to the people (by referendum or, generally, elections), the now hollow traditional phrase "by the grace of God" is still included in the full titles and styles of the monarchs of Denmark, Liechtenstein, the Netherlands and the United Kingdom, but not in that of Belgium, Luxembourg, Monaco, Norway and Sweden. Like the use of the term "subject" for the citizens of a monarchy, "By the Grace of God" is a protocolary form that has survived the emancipation of the electorate from its once absolute rulers, which now only reign in name.
Spain's 1978 Constitution, in article 56, §2, states that the title of the King of Spain is simply "King of Spain" (Rey de España), but that he also possesses the traditional titles of the Spanish Crown (podrá utilizar los demás que correspondan à la Corona). As a result, the King of Spain continues to be King "by the grace of God". During the twentieth-century dictatorship of Francisco Franco, Spanish coins bore a legend identifying him as Francisco Franco, por la G. de Dios Caudillo de España ("by the G(race) of God, Leader of Spain").
Parallels exist in other civilizations, e.g. Mandate of Heaven of the Chinese empire, where for centuries the official decrees by the Emperors of China invariably began with the phrase (pinyin)"Fèng Tiān chéng yùn, Huángdì zhào yuē" (奉天承運 皇帝詔曰) which is translated as "By the Grace of Heaven, the Emperor decrees".
Slavonic and Baltic languages:
Other languages:
Similar concepts unrelated to and sometimes predating Christianity:
In some cases, the formula was combined with a reference to another legitimation, especially such democratic notions as the social contract, e.g.