They embrace principal system of divine rule (8)
I believe the answer is:
thearchy
'system of divine rule' is the definition.
'they embrace principal' is the wordplay.
'embrace' indicates putting letters inside.
'principal' becomes 'arch' (as in arch-enemy).
'they' placed around 'arch' is 'THEARCHY'.
(Other definitions for thearchy that I've seen before include "Ecclesiastical governors" , "rulership" , "Rule by god(s)" , "religious form of ruling" .)