In verse 1 the Hebrew phrase translated restored the fortunes of Zion uses the same language that appears in 14.7; 53.6; 85.1 (and which Revised Standard Version translates also “restores [or, restore] the fortunes of…”). Good News Translation has here “brought us back to Jerusalem,” but in the other passages it has “makes (or, have made) … prosperous again” (as in the footnote here). It is generally agreed that the Hebrew phrase as such means to reverse an unhappy situation to a prosperous situation formerly enjoyed (so New English Bible “turned the tide of Zion’s fortune”). But its precise meaning in a given passage must be determined by the context. Here there is not enough evidence one way or the other to determine whether it means the return of the Jews from exile, as Good News Translation, New American Bible, New International Version, Bible de Jérusalem, New Jerusalem Bible, Die Bibel im heutigen Deutsch, and Moffatt have it, or, in a general sense, the restoration of Israel’s former prosperity (so New Jerusalem Bible, Biblia Dios Habla Hoy, Bible en français courant, Zürcher Bibel, New English Bible, Dahood). No final decision is possible, and commentators are as much divided on the matter as are translators. Some believe that the words express a hope, not a fact, and so translate “When the LORD restores…” (An American Translation, New Jerusalem Bible, Weiser); but it seems preferable to take it as a statement of past fact. If the translator follows Good News Translation and other translations which understand verse 1 to refer to the return from exile, it may be necessary in some languages to make explicit the place from which they were brought back; for example, “When the LORD brought us back from captivity to Jerusalem” or “When the LORD returned us to Jerusalem from the place we were in exile.”
Zion here stands for the city of Jerusalem (see 2.6).
Line b of verse 1 can be translated “we thought we were dreaming.”
In verses 2-3 the psalmist describes the happiness of the people whom the LORD had rescued. Lines a and b of verse 2 are synonymous, both indicating great joy. The two lines of verse 2 are semantically but not syntactically parallel. Line b also depends on the verb from line a to complete its sense. The two lines form a poetic unit and should normally be retained in translation, unless, of course, it suits the style of the receptor language to dissolve them into one, as in Good News Translation. In the next line they said among the nations means “people of other nations said to one another.” The phrase the nations can be translated “the foreign nations” or “the heathen” (see 2.1). The Gentiles recognized what Yahweh had done for the Israelites; it may be necessary to make this quite clear and translate “The LORD has done great things for his people.” In verse 3a the psalmist takes up their statement and repeats it, adding we are glad or, as New Jerusalem Bible has it, “we were overjoyed.”
Quoted with permission from Bratcher, Robert G. and Reyburn, William D. A Handbook on the Book of Psalms. (UBS Helps for Translators). New York: UBS, 1991. For this and other handbooks for translators see here .