In the keynote policy speech to the World Affairs Council in Los Angeles, Mr Blair pledged to continue to work to halt hostilities in Lebanon and in the wider Middle East.
The speech forced Mr Blair's official spokesman to counter suggestions that his comments indicated a significant foreign policy shift or even an admission that his policy on Iraq and Afghanistan had failed.
"But once that has happened, we must commit ourselves to a complete renaissance of our strategy to defeat those that threaten us," he said.
"There is an arc of extremism now stretching across the Middle East and touching with increasing definition countries far outside that region.
"To defeat it, we need an alliance of moderation that paints a different future in which Muslim, Jew and Christian, Arab and Western, wealthy and developing nations can make progress in peace and harmony with each other."
He warned that without rethinking the wider global agenda on poverty, climate change, trade and the Middle East, the battle against extremism would be lost.
Strong on Iraq
However, Mr Blair was unwavering on his position over Iraq, again backing the United States in the so-called "war on terror", launched after the September 11, 2001 attacks in New York and Washington.
In a question-and-answer sessions afterwards, Mr Blair described the effect of "9/11" on him.
"Our choice has got to be the values of liberty and tolerance and justice, a world that's free but also a world that fair. That's what I decided after that time to dedicate our foreign policy to," he said.
Mr Blair tied in the March 2003 US-led invasion of Iraq into that wider aim, explaining it was "values change" rather than "regime change.
But the Middle East featured most prominently in the address to the 2,000-strong audience at LA's Westin Bonaventure hotel.
"The purpose of the provocation that began the conflict was clear," he said, indicating his support for Israel and against the Shiite Hezbollah militia in Lebanon.
"It was to create chaos, division and bloodshed to provoke retaliation by Israel that would lead to Arab and Muslim opinion being inflamed, not against those who started the aggression but against those who responded to it.
"It's still possible even now to come out of this crisis with a better long-term prospect for the cause of moderation in the Middle East succeeding.
"But it would be absurd not to face up to the immediate damage to that cause which has been done."
Syria, Iran condemned
Mr Blair also reserved strong condemnation for Syria and Iran, accusing them not only of supporting Hamas and Hezbollah, but the forces of what he called "reactionary Islam" against moderate, progressive Muslim opinion.
On the wider fight between moderates and reactionists, Mr Blair said: "We will not win the battle against this global extremism unless we win it at the level of value as much as force, unless we show we are even-handed, fair and just in our application of those values to the world.
"In reality we are at present far away from persuading those we need to persuade that this true.
"Unless we reappraise our strategy, unless we revitalise the broader global agenda on poverty, climate change, trade and in respect of the Middle East, bend every sinew of our will to making peace between Israel and Palestine, we will not win, and this is a battle we must win."