"We know Saddam Hussein had weapons of mass destruction but we know we haven't found them," Blair told a committee of senior parliamentarians on Tuesday. "I have to accept we have not found them, that we may not find them."
Blair persuaded reluctant British politicians to back the war on Iraq last year on the basis that it had banned weapons and could use them.
A now notorious dossier, released in September 2002, said some of them could have been let loose within 45 minutes of an order to do so.
Yet more than a year after Saddam was toppled, no such weapons have been found. Blair's public trust ratings have withered over the same period.
Blair said the absence of banned weapons did not mean Saddam did not pose a threat to the region and to world stability, and that he was glad that he had been removed from power.
"They could have been removed, they could have been hidden, they could have been destroyed," he said. "The truth is he was a threat."
"I have to accept
we have not found
them, that we may
not find them"
British prime minister
The government is braced for a potentially damaging report next week into British intelligence about Iraq's weaponry and the way it was used.
Former top civil servant Lord Butler will unveil his conclusions on 14 July.
Blair also said that the US prison camp at Guantanamo Bay, Cuba, was an "anomaly" that has to end. Blair confirmed that he had personally asked US President George Bush to free the remaining four Britons detained in the camp.
He said Washington continued to insist, however, that the British government must guarantee the men will not pose a threat, either to Britain or elsewhere in the world.
"Guantanamo Bay is an anomaly that has at some point got to be brought to an end," said Blair.
Four Britons are still being held in
the Guantanamo Bay prison
"The American response has been the same all the way through. At the end, if the trial requirements do not meet our standards, then they will come back, but we also have to make sure that they will not be a threat either to this country or elsewhere," he added.
Five other Britons who spent up to two years in US custody at the base were released to British officials in March, and were soon freed without charge.
London is still locked in discussions with Washington over the detention of four other Britons held at Guantanamo: Muazzam Begg, 36; Feroz Abbasi 23; Richard Belmar, 23; and Martin Mubanga, 29.
Begg and Abbasi are listed as some of the first detainees likely to face a military commission there. Last week, Britain's Attorney General, Lord Goldsmith, said the commission would not provide a fair trial by international standards.