After the first-ever complaint by a prime minister, the watchdog rebuked the Mail on Sunday over claims that 10-year-old Kathryn had received preferential treatment in the couple's choice of school. The article breached the PCC's new code of practice, which says young people should be free to complete their time at school without unnecessary intrusion.
Downing Street said it was a "landmark judgement" that would help give the children of famous people the same protection as non-famous children.
The Mail on Sunday's story, published in January, claimed that Kathryn had been given special treatment in being admitted to a Roman Catholic girls' comprehensive, the Sacred Heart School in Hammersmith, west London, from this autumn.
But the PCC said it "could find no justification for naming Kathryn Blair alone in connection with complaints about the admission criteria of the school. There was no evidence of special treatment in her favour." It said the article about the school's selection procedure could have been written without reference to Kathryn or by making her the centre of the story. "By herself, she could have been no more responsible for denying a place to the large number of unsuccessful candidates than any of the other girls actually admitted who equally could have been individually highlighted by the articles."
The PCC concluded that the newspaper had reproduced allegations "potentially damaging to a child in a misleading way without evidence of special treatment in her case".
"There was no evidence to support the allegation that Kathryn Blair was unfairly admitted or had received special treatment, and the newspaper did not provide any."
Last night a spokesman for the Prime Minister said: "The Prime Minister and Mrs Blair welcome this ruling. They hope it will ensure that their children and the children of other public figures will in future enjoy the same right to complete their schooling in privacy to which all children are entitled."
The Mail on Sunday said it published the articles in the "deeply-held belief that they raised important issues about Labour's education policies. We defended them because we strongly believe that the press should be free to report such matters," the newspaper said.