David Cameron has urged the prime minister to declare the EU constitution "null and void" after last week's summit failed to reach a consensus.
Mr Blair says Europe needs a modern set of rules
He quoted Labour's representative on the constitutional convention who said the measure was finished - "like the parrot dead, deceased and no more".
But Tony Blair said it would be wrong to rule out its return despite the French and Dutch voting "no" last year.
He said the EU needed a "modern set of rules" to deal with its expansion.
'Period of reflection'
He also warned the Tories that to cut their ties with the European People's Party was a "foolish error of judgement", which could have an impact on Britain's standing in the EU.
He cautioned Mr Cameron from aligning himself with MEPs regarded as "nutters" and members of the "barmy army", and said the British Chamber of Commerce had stated the move would damage UK commercial interests.
In a statement to MPs, Mr Blair said the EU's 25 member states had opted for a "further period of reflection" on the constitutional treaty after failing to reach a consensus.
EU leaders have agreed to delay talks on the issue until 2008.
But Mr Cameron said the constitution should be declared "null and void" following its rejection by France and Holland.
He said the "real alternative" was an open and flexible Europe, adding: "The government is perhaps starting to look a bit like a Monty Python sketch, so perhaps it is time to say: and now for something completely different.
"Instead of your usual pre-prepared rant, will you answer two questions on the key issues at the summit - will you give up the veto on home affairs and is the constitution dead, yes or no?"
Mr Blair said deciding whether it was dead or not "depends not simply on me but all the other countries in Europe... it cannot be proceeded with unless there is an overturning of the French and Dutch votes".
But if the EU's enlargement continued to 27 - with Romania and Bulgaria due to join soon - the issue of a constitution would be a live one, he said.
The addition of more countries would create a completely different EU from that envisaged by its founders, and a new framework would be needed for a more effective working of the union, he said.
The EU summit also discussed better regulation - with the withdrawal of 70 pieces of legislation - immigration and climate change.
Liberal Democrat leader Sir Menzies Campbell welcomed the renewed commitment to enlargement.
Sir Menzies, who also criticised the Tory proposal to quit the EPP, said that a union of 25, soon to be 27, could not operate within a framework designed for six.