A Tibetan monk with a bishop in a US state (7)
I believe the answer is:
alabama
'a us state' is the definition.
(Alabama is a US state)
'a tibetan monk with a bishop' is the wordplay.
'tibetan monk' becomes 'lama' (I've seen this before).
'with' means one lot of letters goes inside another.
'bishop' becomes 'B' (chess abbreviation).
'a'+'b'='ab'
'lama' placed around 'ab' is 'labama'.
'a'+'labama'='ALABAMA'
'in' acts as a link.
(Other definitions for alabama that I've seen before include "Confederate state during the American Civil War" , "Southern US state" , "State of southeastern US" , "American state, capital Montgomery (7)" , "Source of cotton" .)