More than a decade of mass immigration from the EU under freedom of movement rules was a major factor in the referendum that saw Britons vote to leave the EU.
David Cameron as prime minister sought reform but got little out of his fellow EU leaders.
But Blair said the election of French President Emmanuel Macron had changed EU dynamics.
"Rational consideration of the options would sensibly include the option of negotiating for Britain to stay within a Europe itself prepared to reform and meet us half way," he wrote in an article for his Institute for Global Change think-tank.
"The members of the eurozone will integrate economic decision-making.
"Inevitably, therefore, Europe will comprise an inner and outer circle. Reform is now on Europe's agenda.
"The European leaders, certainly from my discussions, are willing to consider changes to accommodate Britain, including around freedom of movement. Yet this option is excluded."
Blair won a Labour record of three straight general elections, having shifted the party from the left towards the centre ground. He was Britain's prime minister from 1997 to 2007.
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