Early intervention in "hard to reach" families is more effective in rooting out social exclusion than throwing money at the problem, Tony Blair says.
The PM said he was not talking about "baby Asbos", but about preventing children from going "off the rails".
In a speech in York, he said while people will see intervention as "very sinister", it often means extra help and support can be provided.
However, critics say the scheme sounds too much like "eugenics".
Mr Blair was making his first policy speech at the Joseph Rowntree Foundation in York since his summer holiday in Barbados and a visit to Balmoral.
He made the speech as the Daily Mirror released a leaked memo detailing the prime minister's exit strategy from Number 10.
'Hard to reach'
It also comes as it emerged that a group of normally loyal Labour MPs have written to Mr Blair urging him to quit.
Downing Street said the prime minister's speech was one of a series, which include his thoughts on criminal justice, health and science.
"It shows the prime minister is interested in substance, not image, and that what he wants to do is continue to focus on the issues," his official spokesman said.
In his speech, Mr Blair said the "hard to reach" groups his "social exclusion plan" hoped to target included: children in care, families with complex problems, teenage pregnancies and mental health patients.
Mr Blair told the BBC last week social intervention could happen "pre-birth".
Clarifying these remarks, he told his audience in York "I am not talking about 'baby Asbos', trying to make the state raise children, or interfering with normal family life".
"I am saying that where it is clear, as it very often, at a young age, that children are at risk of being brought up in a dysfunctional home where there are multiple problems, say of drug abuse or offending, then instead of waiting until the child goes off the rails, we should act early enough ... to prevent it."
This was not "stigmatising the child or family". "It may be the only way to save them and the wider community from the consequences of inaction," he said.
The problem was "not that we are not trying, nor that the money is not being committed, it is that we need a radical revision of our methods".
"The social exclusion plan will be guided by five principles: early intervention, systematically identifying what works, better co-ordination of the many separate agencies, personal rights and responsibilities and intolerance of poor performance.
"More than anything else, early intervention is crucial. It is a commonplace that prevention is better than cure."
He said health visitors and midwives would seek out those most at risk by asking young parents or parents-to-be about the difficulties they may be having or about their background.
Mr Blair conceded that people hearing his proposals "will shout about the 'nanny state', who will tell us it's none of 'our business', who will say more reasonably that if you try to predict, you stigmatise.
"But today's society doesn't work like this."
He said it was not for the state to tell people they cannot choose a different lifestyle in issues, such as to do with sexuality.
"But where children are involved and are in danger of harm or where people are a risk to themselves or others, it is our duty not to stand aside," he said.
"Their fate is our business. The alternative is that these children, these adults, these families are left behind, abandoned, when they need to be helped."
Liberal Democrat leader Sir Menzies Campbell claimed Mr Blair's words were "too little, too late".
"It is deeply worrying that the chances of a poor child becoming a poor adult are still growing. At the same time, bonuses in the City have climbed to record levels," he said.
"Who would have predicted this after nine years of a Labour government?"
Clare Tickell, chief executive of children's charity NCH, said the government needed to prevent youngsters from being taken into care in the first place.
"Having one person responsible for making sure each child in care is listened to could transform their life chances," she said.
Adam Sampson, director of Shelter, said the government needed to build more social rented homes if it wanted "to offer these children the chance of a brighter future".
Mary Marsh, chief executive of the NSPCC, said moves to tackle social exclusion must include cutting levels of child abuse and neglect.