The limited exemptions for religious groups from gay discrimination laws should not be widened, Parliament's joint committee on human rights says.
Mr Blair's Cabinet was said to be split over the row
Exemptions for "organisations relating to religion or belief" were necessary to "protect the right to freedom of conscience, religion and belief".
But religious organisations "performing a public function on behalf of a public authority" should not be exempt.
Catholic adoption agencies last month lost their battle to be exempt.
The Catholic Church, backed by senior members of other religions, argued they should not have to consider gay couples as prospective parents as it went against its beliefs.
After protracted debate within government, Downing Street decided that no such exemption would be included in the UK regulations, which are expected to come into force in April.
The human rights committee published a report on Wednesday to consider what exemptions from the new laws should be allowed "to protect the right to freedom of conscience, religion and belief" of the European Convention on Human Rights.
The new regulations are already in operation in Northern Ireland, and the committee backed the limited exemptions in place there.
These exemptions say people cannot be required to perform same-sex marriages, or allow homosexual people into their religious organisations, or allow them to join in their activities or use their premises "if this would be contrary to their religious belief".
The committee said: "In our view, the scope of the exemption...gives adequate protection to the absolute right ...to freedom of conscience and religion."
Recommending the same scope for UK regulations, the committee concluded that the Northern Ireland regulations were "compatible with human rights, but an exemption which went wider" would breach the ECHR.
The report says there is nothing in the ECHR or "other human rights standard" to "permit religious organisations to discriminate on grounds of sexual orientation when delivering services on behalf of a public authority".
"Such an exemption would provide a protection not for the holding of a religious belief but for the manifestation of that belief," the report adds.
"Where such manifestation of a belief conflicts with the right of gay people not to be discriminated against in their access to services as important as adoption services, it is in our view necessary and justifiable to limit the right to manifest the belief."
Tony Blair announced in January that Catholic adoption agencies would have 21 months to prepare for the change after they earlier said they would close rather than place children with gay couples.