"I'm extremely concerned that if you leave Gaza in the state it's currently in, you'll have another eruption, and violence, and then we're back in a further catastrophe, so we've got to stop that," he said.
Blair was making his first trip to Gaza since the July-August war between Israel and the territory's Islamist rulers Hamas.
The conflict killed about 2,200 Palestinians and 73 on the Israeli side, and left 100,000 Gazans homeless.
Britain's former premier also called for a rethink on how peace could be reached, two decades after the historic accord which was to have paved the way for a final agreement.
"So 20 years after Oslo we need a new approach to Gaza and a new approach to peace," Blair said.
"The problem in my view, having spent almost eight years in this role, is not as often thought, locking negotiators in a room long enough to make an agreement," he said.
Blair also said that "the place to start with peace is actually Gaza, because if we're able to change the situation in Gaza, politically and economically, then we're able to do a lot of changes in the whole of the politics of this conflict".
The Quartet envoy called on Israel to open its crossings into the territory, and on Gaza to "open up and reconnect with the world", stressing that Palestinian reconciliation could only happen if it is "based on peace".
A unity deal between the West Bank-based Fatah, which dominates the Palestinian Authority, and Hamas has faltered since its signing last April.
Set up in Madrid in 2002, the Quartet is composed of the United Nations, the United States, the European Union and Russia.
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