Blair, addressing a monthly news conference on Monday, said: "We know Iran supports terrorism around the Middle East it should stop it; until it stops it, there will be a deep dismay about the Iranian regime right round the world. They've just got to accept that," Blair said.
"What they do with this terrorism is that they prevent political progress being made whether it's in the Middle East or elsewhere."
Iraq the key?
Last week, Blair said military action against Iran was not being considered, but warned that the international community would not stand for continued breaches of Tehran's obligations.
A week earlier, at a European Union summit, Blair made comments that were interpreted as threatening military action.
Responding to Iranian President Mahmoud Ahmadinejad's call for the destruction of Israel, he said regarding Iran's leaders: "If they carry on like this, the question people are going to be asking us is: 'When are you going to do something about this?"'
Blair slammed Ahmadinejad's
comments on Israel
Blair said on Monday the only thing that could force Iran and Syria to change was a stable and democratic Iraq.
"There is a reason why Iran and Syria do their best to destabilise the situation in Iraq because they know that if Iraq is allowed to develop as a strong, Muslim state but with secular democratic government, then it's the best argument you can possibly have for people in Iran and in Syria to say 'Why don't we have some of that democracy? Why don't we have proper civil and human rights, too,"' Blair said.
He said the international community must present a unified stance and find ways of letting Iran know the strength of opposition to their actions.
"This is not aimed at Iran, or the Iranian people or even the regime except to the extent that the regime is doing things that are completely unacceptable in the international community - like supporting terrorism, like meddling in Iraq, like trying to have a nuclear weapons programme when you are not supposed to have one."
Blair said Iran should meet
demands on its nuclear plans
Blair also repeated calls for Iran to do more to meet international demands meant to ease concerns over its suspect nuclear programme.
"Iran's got to face up to its responsibilities; its got to abide by the strictures and obligations of the atomic energy authority," he said.
The comments come as Iran said it will propose its own peace plan to the United Nations to stop the Israeli-Palestinian conflict, Foreign Minister Manouchehr Mottaki said on Monday.
"The foreign ministry is going to propose to the United Nations a comprehensive plan for peace in the Middle East," Mottaki said in a conference on Central Asia and Caucasus.
He added the plan "had been introduced some years ago by the supreme leader," Ayatollah Ali Khamenei.
Khamenei said years ago that the only solution to end the Israeli-Palestinian conflict would be to call for a referendum, participated in by Palestinians of different religions and refugees around the world.
In October, Ahmadinejad called for Israel to be "wiped off the map," comments that increased concerns over the country's bid to master nuclear fuel technology and led Israel to call for Iran's expulsion from the United Nations.