Blair said it was true that "people commit horrific acts of evil in the name of religion". But Blair, who converted to Catholicism in 2007, said it was also true that religion inspires acts of extraordinary good.
And he said it was important not to condemn all people of religious faith because of the "bigotry or prejudice shown by some".
Blair also told the 2,700-strong audience in Toronto, Canada, the invasion of Iraq was "not about religious faith" but decisions on the war were "based on policy".
He said: "It can be destructive, it can also create a deep well of compassion, and frequently does."
Blair said the common thread running through all faiths was to "do unto others as you would have them do unto you" and continued: "(Faith] answers a profound spiritual yearning, something we feel and sense instinctively.
"This is a spiritual presence, bigger, more important, more meaningful than just us alone, that has its own power separate from our power."