"The comments of the Iranian President earlier today, that the solution lies in the elimination of Israel, are deeply unhelpful," Blair said at his monthly press conference in London.
Blair restated comments he made on his recent trip to the United States, calling for Iran and Syria to engage in the search for a long-lasting, sustainable solution to the conflict.
But he said that his warnings that if Tehran and Damascus did not become involved that they would face confrontation with the international community did not mean the threat of military action.
Blair and US President George W. Bush last Friday identified Iran and Syria as the main sponsors of the Shiite group Hezbollah in Lebanon.
Ahmadinejad was quoted as making the comments from Putrajaya in Malaysia, where he is attending a Muslim nations summit aimed at pressing for an end to Israel’s military campaign.
Last year he called for the Jewish state to be "wiped off the map", prompting international condemnation.