"I welcome the statement of the IRA that ends its campaign, I welcome its clarity, I welcome the recognition that the only route to political change lies in exclusively peaceful and democratic means," Blair said on Thursday.
Earlier, the IRA said in a statement it would cease all armed activity and pursue its aims through politics, a crucial move to kick-start talks on a lasting political settlement in the province.
Blair said the step was of "unparalleled magnitude" and that it paved the way for a power-sharing government to be revived.
"There is at least some hope today that the future will indeed be such as to banish the ghastly, futile violence of Northern Ireland forever," he said.
He also called on the guerrilla organisation to decommission
its weapons as soon as possible.
British and Irish politicians had mixed reactions to the IRA's formal announcement.
"Today's developments can herald a new era for all of the people on the island of Ireland," said Irish Prime Minister Bertir Ahern.
"I welcome the statement of the IRA that ends its campaign, I welcome its clarity, I welcome the recognition that the only route to political change lies in exclusively peaceful and democratic means"
British Prime Minister Tony Blair
But Ireland's main protestant political party, the DUP, said "the history of the past decade in Northern Ireland is littered with IRA statements which we were told were 'historic', 'ground-breaking' and 'seismic'.
"Even on the face of the statement, they have failed to explicitly declare an end to their multi-million-pound criminal activity and have failed to provide the level of transparency that would be necessary to truly build confidence that the guns had gone in their entirety," it added.
Fine Gael from the main opposition party in the Republic of Ireland echoed this view, saying the "IRA statements on their own are no longer sufficient to convince people".
British conservative North Ireland spokesman David Lidington also agreed with Gael, saying: "I want to see evidence that the arms have been decommissioned and verifiably so and also that the IRA ceases to exist as an effective paramilitary organisation."
But moderate catholic politician and Nobel laureate John Hume said: "Now the road is totally clear, I am reasonably confident we will make further progress."
The White House on Thursday called the IRA's pledge to end armed activities potentially historic but said the group must now follow-up with concrete actions.
"This IRA statement must now be followed by actions demonstrating the republican movement's unequivocal commitment to the rule of law and to the renunciation of all paramilitary and criminal activities," said White House spokesman Scott McClellan.
McClellan said the IRA's words
must now be followed by deeds
Massachusetts Democratic Senator Edward Kennedy said on the Senate floor that he hoped the statement meant the long process was nearing an end to take "guns and criminality out of politics in Northern Ireland once and for all".
Mitchell Reiss, US special envoy to the Northern Ireland peace process, called the IRA pledge a good first step, apparently driven by a public backlash to such actions as the murder of popular Belfast man Robert McCartney and a big bank heist last December.
"What we don't know is whether it's truly historic and we'll find that out in the next weeks and months as they translate words into deeds on the ground," he said.
He said he got the sense that Sinn Fein, the IRA's
political wing, wanted to keep the momentum going and that he hoped there would be a move by the IRA to decommission weapons in the next few weeks.