The Collaborative International Dictionary of English v.0.48:

Theocracy \The*oc"ra*cy\, n. [Gr. ?; ? God + ? to be strong, to
   rule, fr. ? strength: cf. F. th['e]ocratie. See Theism, and
   cf. Democracy.]
   1. Government of a state by the immediate direction or
      administration of God; hence, the exercise of political
      authority by priests as representing the Deity.
      [1913 Webster]

   2. The state thus governed, as the Hebrew commonwealth before
      it became a kingdom.
      [1913 Webster]

WordNet (r) 3.0 (2006):

theocracy
    n 1: a political unit governed by a deity (or by officials
         thought to be divinely guided)
    2: the belief in government by divine guidance