Blair said the government would also ban a successor organisation to al Muhajiroun, a group that celebrated the September 11 2001, attacks on the United States but is meant to have disbanded.
"We will proscribe Hizb ut-Tahrir and the successor organisation of al Muhajiroun," Blair told a news conference.
Hizb ut-Tahrir Britain spokesman Imran Waheed branded Blair's remarks "most unjust" and pledged the group would battle any ban via the courts.
Waheed said: "Our views are very similar to those in the Muslim community. We want an end to Western interference in Muslim countries.
"By doing this, he (Blair) is setting an example to the tyrant rulers of the Muslim world, encouraging them to further suppress their populations.
"Hizb ut-Tahrir is a non-violent political party.
"It has had a history of non-violence for the last 50 years and these measures are like what we have seen in Uzbekistan where President (Islam) Karimov has been burning his political opponents alive."
He appeared to be referring to a military crackdown that claimed several hundred lives in eastern Uzbekistan in May, which the Uzbek government said was a response to a plot by Hizb ut-Tahrir to seize power in the country.
"Our members are all for political expression, not for violence," said the spokesman.
The Muslim Council of Britain, the country's biggest Islamic representative organisation, also weighed in, saying that although it held no brief for Hizb ut-Tahrir, which it understood to be non-violent in Britain, the ban could backfire.