However, she added that it was wrong to say that the country did not treat its women equally, The Independent newspaper reported on Wednesday.
Cherie was speaking at a dinner held in the House of Lords on Monday to promote Muslim women in public life, an event also attended by the Saudi ambassador to Britain.
Addressing Prince Turki al-Faisal, Cherie said: "I am so delighted that his Royal Highness came from Saudi Arabia because as I said to your wife when I met her Sir, Saudi Arabia's image in the world is appalling and we need to do something about that, we need to help you do something about that."
She added: "Part of the reason it's appalling is the perception that you treat your women like they are not equals but some sort of 'other'.
"And I know that that is not in fact the reality. You have many strong women."
Cherie, a Roman Catholic, vowed to change the "perception of Islam being backward-looking, oppressive - somehow not as good as western Christianity".
She added: "Some of you know my own religion has not always been in the forefront of women's rights, and indeed still isn't sadly."
The Saudi ambassador said he was not offended "at all" by her comments, according to The Independent.
In highlighting Saudi Arabia's "appalling" image, Blair was only echoing the official view of her husband's government.
In its most recent human rights report on the Gulf state, the Foreign Office said it had "deep concerns about Saudi Arabia's failure to implement basic human rights norms", including discrimination against women.