Tony Blair has said decisions will be made in 2006 which could shape the UK's fortunes for generations to come.
Mr Blair is taking a winter break with his family in Egypt
In his New Year message, the prime minister vowed to press ahead with controversial reforms in health, education, energy and welfare.
He emphasised the so-called respect agenda, pledging fresh action to tackle anti-social behaviour.
And Mr Blair also pledged to continue the fight against terrorism in the UK and abroad.
Tory leader David Cameron and Lib Dem leader Charles Kennedy have also made New Year messages.
The prime minister is facing a battle to secure his political legacy in 2006, with backbenchers threatening to revolt over plans to grant independence to state schools.
Some Labour MPs are also uneasy about plans to encourage people off incapacity benefit and into work, and to increase the role of the private sector in the provision of local health services.
Mr Blair, who is taking a winter break with his family in Egypt, listed UK strengths, including high employment and falling hospital waiting lists, and said: "Everyone in our country who has worked hard to achieve this can feel proud of the progress we've made this year.
"Our achievements are being acknowledged across the globe, a fact recognised by the international community when we won the 2012 Olympics for London.
"But 2006 is a year in which critical decisions have to be got right if we are to sustain prosperity and fast-improving public services for the long term.
"On schools, local health services, pensions, welfare, the respect agenda and energy, we face big choices which will decide how prepared we are for the challenges of the future."
He added: "In the respect agenda, the success of the action plan we are publishing in January will be vital if we are to make a lasting difference in reducing anti-social behaviour and effectively tackling the problem families who do so much to damage communities.
"Meanwhile, in welfare, pensions and energy, we have to get right the decisions that will affect the prosperity and security of the people of Britain for the next 50 years."
The prime minister also pledged to push for further progress on global aid following the agreements reached at this year's G8 summit in Gleneagles, as well as pressing for a successful conclusion to World Trade Organisation talks on fairer trade.
And he said he hoped to turn this month's Montreal agreement on global warming into "practical reality".
"We live in a beautiful, prosperous country where most of us work hard and live decent, honest lives," said Mr Blair.
"In an age of rapid change new challenges and threats will emerge constantly but we should always be grateful for what a great country Britain is."
He said Britain had the "only government of any major developed nation investing more public money in health and education every year as a proportion of national income".
And he hailed what he called the UK's "strong alliances with the world's only superpower, America, and the world's largest economic market, Europe".
In his New Year message, Tory leader David Cameron said it was "an exciting time to be a Conservative", and activists' personal commitment was the key to reviving the party's fortunes.
Liberal Democrat leader Charles Kennedy warned in his annual message of the "continuing widening of the gap between rich and poor".