In Reformed theology, baptism is a sacrament signifying the baptized person's union with Christ, or becoming part of Christ and being treated as if they had done everything Christ had. Sacraments, along with preaching of God's word, are means of grace through which God offers Christ to people. Sacraments are believed to have their effect through the Holy Spirit, but these effects are only believed to accrue to those who have faith in Christ.

Baptism is the sacrament of initiation into the visible church, or body of people who publicly claim faith in Christ. Baptism also signifies regeneration and remission of sin. Reformed Christians believe that the children of church members should be baptized. Because baptism is believed to be beneficial only to those who have faith in Christ, infants are baptized on the basis of the promise of faith which will come to fruition later in life.

Christian baptismal theology prior to the Reformation taught that sacraments, including baptism, are means or instruments through which God communicates grace to people. The sacrament was considered valid regardless of who administered it. Not everyone who received a sacrament, however, received the grace signified by the sacrament. Some medieval theologians spoke of an obstacle of mortal sin which blocks the grace of the sacrament, while others insisted that the recipient be positively open and responding in faith to the sacrament in order to receive any benefit. Baptism was believed to be used by the Holy Spirit to transform the believer, and offered the benefits of remission of sins, regeneration, and the indwelling of the Holy Spirit. The sacrament of penance was believed to be necessary for forgiveness for sins committed after baptism.

During the Reformation, Martin Luther rejected many of the Catholic Church's seven sacraments, but retained baptism and the Lord's Supper. He saw many practices of the medieval church as abuses of power intended to require work in order to merit forgiveness for sin after baptism rather than faith alone. Luther attached the promise of salvation to baptism, and taught that life after baptism should be spent in recollection of it and the dying to sin it signified.

Huldrych Zwingli, the earliest theologian considered part of the Reformed tradition, was vigorously opposed to worship practices he believed to be based on tradition rather than the Bible. Nevertheless, he disagreed with Anabaptists, who refused to baptize their children on scriptural grounds. Through his arguments with Anabaptists, Zwingli arrived at the position that baptism was a sign of the covenant between God and his people, but that it did not convey grace to the baptized. He saw baptism as essentially identical to the circumcision of Israelites in the Old Testament in this respect, and used this idea in polemics against Anabaptists. Zwingli's emphasis on baptism as a pledge or oath was to prove unique in the Reformed tradition. Heinrich Bullinger, Zwingli's successor, continued the teaching of the continuity of God's covenants and circumcision with baptism. Bullinger also emphasized that baptism indicates duties to the baptized in response to God's grace.

John Calvin was influenced by Martin Luther's idea of baptism as God's promises to the baptized person attached to the outward sign of washing with water. Calvin maintained Zwingli's idea of baptism as a public pledge, but insisted that it was secondary to baptism's meaning as a sign of God's promise to forgive sin. He maintained that sacraments were effective instruments in bringing about the promises they represent, however he also maintained that the promises could be refused by the baptized, and would have no effect in that case. Calvin carefully distinguished between the outward sign of the washing of water with the promises that baptism signifies while maintaining that they were inseparable. Calvin's baptismal theology is very similar to that of Luther. It differs in the way Calvin subordinated sacraments to the preaching of the word of God. While Luther placed preaching and sacraments on the same level, Calvin saw sacraments as confirmation which is added to the preaching of the word of God.

From the end of the sixteenth century through the eighteenth century, a period known as Reformed orthodoxy, Reformed baptismal theology further developed the covenantal meaning of baptism. Theologians more carefully defined the sacramental union of baptism, or the relationship between the outward washing with that which it signifies. In the high orthodox period (middle to late seventeenth century), theologians such as Hermann Witsius expanded the covenantal meaning of baptism using analogies such as Noah's Ark and the crossing of the Red Sea, which carried the theological themes of the resurrection and eternal life. This period also saw the emergence of Reformed Baptists. Reformed Baptist theologians had much in common with the Reformed, but saw baptism as a sign of the baptized's fellowship with Christ rather than a sign and seal of the covenant of grace, and as a result did not baptize their children.

Friedrich Schleiermacher, an influential nineteenth-century Reformed theologian, saw baptism as the way the church receives new members and taught that faith is a precondition for baptism. He was ambivalent about the practice of infant baptism, teaching that it was not an essential institution, but could be continued as long as the church was faithful in bringing children to confirmation. Schleiermacher also saw baptism as primarily individual rather than initiating one into a covenant community, and rejected the idea that baptism should be connected with Old Testament circumcision.