The Linlithgow MP, who celebrates 40 years in the House of Commons next week, claimed Mr Blair had adopted a "presidential style" that ignored parliamentary democracy.
He criticised the prime minister over his decision to commit British troops in Afghanistan and his apparent support for a future military strike on Iraq.
Mr Dalyell, who is Father of the House of Commons, also attacked the "entourage" of special advisers now used.
The veteran MP said he would put Mr Blair in last place out of the eight prime ministers and seven Labour leaders he seen since entering Parliament.
Redemption hopes
"It's about the bombing of Iraq, it's about what he did in relation to the bombing of Belgrade ... and indeed the bombing of Afghanistan, which was not the right way to go about the dreadful events of September 11," he said.
"It's a difference of opinion".
Mr Blair was not "irredeemable", the veteran MP told BBC Radio 4's Today programme.
He could raise his status by changing his mind on bombing of Iraq and by honouring his promise to rebuild the Balkans.
Mr Dalyell also launched a strong critique of the row over a former transport special adviser's e-mail trying to discover the political sympathies of the Paddington Survivors' Group of rail crash victims.
"How is it that in a government these youngsters just toss off e-mails without proper thought," he said.
"Special advisers and all that entourage, I think, are a menace.
"I am a believer in the civil service and if you have special advisers, they should give specialist advice."
'Presidential' approach
Mr Dalyell did praise some of the achievements of the government as a whole, singling out Chancellor Gordon Brown as someone who had enjoyed "great success".
He also attacked Mr Blair's approach to Parliament.
In a separate interview for Grampian Television's Crossfire programme, he said: "I would be much happier if he realised that that we live in a parliamentary democracy and not a presidential system."
Mr Dalyell said he was an admirer of Wilson's leadership and that of former prime minister Jim Callaghan.
"Harold Wilson, alright he weaved and ducked, but he kept Britain out of the Vietnam War," he added.
Who do you think have been the best and worst prime ministers? Click on the Have your Say button to get to the postform to send your views.
Your comments
Best - Tony Blair; Second - Clem Atlee; Third - Harold Wilson; Worst - Margaret Thatcher; Second worst - Winston Churchill (Peacetime Govt)
Your earlier correspondent demonstrates a lack of knowledge of UK parliamentary history - Churchill won a peacetime election in 1951.
Chris Rogers, UK
Best: Early Margaret Thatcher
Worst: Alec Douglas-Home
Best who didn't make it: John Smith
Luckiest escape : Michael Foot
Ian Robertson,
Scotland
The best PM was Harold Macmillan for his brand of compassionate conservatism, and the worst was the neo-liberal Thatcher who destroyed the reputation that the Tories once had for looking after those less fortunate in society
James Turgoose, Britain
Probably the best prime minister of the last century was Winston Churchill, but I'm glad he wasn't PM during peacetime, as he would probably have been dreadful.
Alistair, USA (British citizen)
The Best PM was Margaret Thatcher, she and her government established the foundations for the economy which Blair (the Worst PM) has been able to milk.
Mike Slade, England
Attlee's number one: NHS, Welfare State, Indian independence, post-war restructuring, a real Cabinet chairman. Worst of them all is Thatcher: 3 million unemployed, recession, privatisation.
J Dhesi, England
Thatcher must be ranked the best. Last place is a tie between Heath and Major, two totally inadequate PMs who were just out of their depth.
Stephen C, UK
Best - Baroness Thatcher,
Worst - Tony Blair
Father Richard Seabrook SSC,
United Kingdom
Undoubtedly the best Prime Minister of the last century was Clement Attlee, a real primus inter pares, a socialist and a patriot and a founder of the welfare state. The worst, with even less doubt:Margaret Thatcher. At no point during the 1980s did the majority of the country actually want her, it just was split amongst her varied opponents.
Peter Morton, Scotland
I think Blair is the worst Prime Minister I can remember. It worries me that he is more concerned with his future in Europe than doing the correct thing for Britain.
H Skinner, UK
The Best PM was Margaret Thatcher in her 2 first terms. The worst is a tie between the devious Harold Wilson and the self-regarding Edward Heath.
Clifford Tucker,
England
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