Lady Thatcher's reported remarks threatened to undermine the Tory campaign warning of "New Labour, New Danger" with posters of Mr Blair with demonic eyes.
A spokeswoman for Lady Thatcher said she had no knowledge of the remarks, reported in a diary item in The Times at the weekend by Peter Stothard, the editor.
Mr Stothard, who declined to comment, described an evening in clubland in January in which an unnamed worried Tory from Gloucestershire had asked what sort of prime minister Mr Blair would make.
Mr Stothard quoted "a very senior Tory" replying: "Tony Blair is a man who won't let Britain down."
Tribune, the left-wing newspaper, today names the source as Baroness Thatcher.
But 24 hours after angrily denying Lady Thatcher was acting for Michael Portillo's leadership attempt to replace John Major, her office was forced to dismiss the Blair reports.Reuse content