The Tory peer, a central figure in Conservative campaigns at the last five general elections, paid tribute to Mr Blair's skilful rebranding of New Labour and warned that his ultimate goal is to "destroy us completely".
In a pamphlet to be published today by the Bow Group, Lord Saatchi suggested that under Mr Hague the Tories had not yet developed a strategy to bring them back to power.
"The Labour Party has a plan, and we must have one, too, if we are to fight them successfully," he said.
"If we attempt to muddle along, or to wait on events, or to be obsessed with where we went wrong last time, we will lose."
Mr Hague has poured scorn on Mr Blair's adoption of a third way between old-style socialism and traditional Conservatism.
The Tory leader has said Labour is trying to have it "every way" and that the "third way" means "third rate".
But Lord Saatchi said Mr Blair's idea could be "every voter's dream". By finding a new middle way, Labour could consign the Tories "to the same intellectual dustbin of history as Communism and Marxism".
He said: "Some Tory critics say the `third way' is an empty phrase. Don't listen to them. They are the same Tories who dismissed New Labour as an empty phrase. "We were left flat-footed by the launch of New Labour; uncertain whether to criticise it for being empty or dangerous; a con trick or candyfloss; a copy of us, or what."
Admiring Mr Blair's simplistic slogan, he said Old Labour was portrayed as bad and dangerous, so New Labour must be good and safe.
"We lost our strategic bearings when Labour convinced the public its copying of our economics was a sincere conversion," he said.
Lord Saatchi admitted the Tories were slow to face the fact that Labour had turned from a Marxist-socialist party into a social democratic one.
"Maybe Labour's third way is just stealing our clothes again. But I assure you it intends to polish it up until it shines and relaunch `the middle of the road' and `the art of the possible' as something contemporary, exciting, idealistic."
Lord Saatchi argued that the Tories need a "strategic sense" more than ever, and must avoid the mistakes of previous generations of Conservatives who "seemed to abhor a strategy more than a vacuum".
He added that the Tories' fate remained in their own hands, and that they should not merely sit back to wait for Labour to lose an election.
Insisting that the Government was now starting to make mistakes, Lord Saatchi said: "If we develop new ideas and put New Labour under pressure, we can create weaknesses in their organisation and start to win."Reuse content