Michael Howard has called for "a new deal on Europe" that would allow member states like the UK to determine how much integration they want.
Howard: 'Forcing common EU standards will not work'
The Tory leader said he was "determined that Britain shall remain a positive and influential member of the EU".
In a speech in Berlin, Mr Howard argued EU members should be allowed to decide what is left to national control.
"My policy is simple: live and let live. That is a modern and mature approach," he said.
The keynote speech about Europe is the latest stage in Mr Howard's fleshing out of his political beliefs, as he approaches 100 days as Tory leader.
BBC political editor Andrew Marr said the speech represented a "change in words, not a change in thinking".
In his address, the Tory leader said that as the EU grew from 15 to 25 members, it would be "folly" if the rediscovered national identities of the Eastern European accession countries were undermined.
Britain should remain an influential member of the EU, said Mr Howard, but many people feared its development meant a "one-way street to closer integration to which all must subscribe".
Greater use should be made of EU Treaties that allow member states to go ahead with further integration in a specific area, without involving every other member state, he argued.
Nations could opt-in to those areas they could support.
"Those member states which wish to integrate more closely would be free to do so," he said.
"It would not be necessary for them to drag Britain and quite possibly some other member states, kicking and screaming in their wake.
"We would be able to break free from the institutionalised tug of war which has so often characterised relations between the member states of the EU in the past."
Allowing countries to pursue their own policies in areas such as taxation, would encourage the spread of competitiveness across Europe, said Mr Howard.
"Forcing common standards upon them will mean that Europe as a whole falls further and further behind as each member state tries to put its own costs onto its neighbours."
Mr Howard said the EU "should stop trying to do everything" and instead give member states the chance to develop "their own European approach that suits their national traditions".
On Friday, he denied that he was proposing a multi-speed Europe.
"It is nothing to do with speed," he told BBC Radio 4's Today programme.
"Speed implies you are all travelling towards the same destination but at a different pace."
Europe Minister Denis MacShane said Mr Howard's "policies would plunge Europe into a permanent crisis of nations squabbling with nations.
"His Berlin speech confirms Mr Howard as a committed anti-European and his goal remains to take Britain to the exit door of Europe."
Mr Howard also said his desire for the UK to keep the pound did not mean he was against the euro or hoped for its failure.
He added that it was "vital" Europe and America continued to remain close and that Nato should "remain the cornerstone of our defence".
Eurosceptic Tory MP Bill Cash said much of Mr Howard's speech was extremely good.
But he said that treaties would have to be renegotiated to achieve Mr Howard's objectives.
Charles Grant, from the Centre for European Reform, said the speech marked Mr Howard's desire for a more positive relationship with Europe from that favoured by his predecessor, Iain Duncan Smith.