Mr Blair said his party's values commit it "to ensure that power, wealth and opportunity are in the hands of the many and not the few, so that all can live in dignity and without fear".
The Labour leader's words, in a speech in his Sedgefield constituency, were billed as the closest formulation to be made public before Mr Blair proposes a final replacement for Clause IV that commits Labour to nationalisation.
Mr Blair's high-profile quest to reform the party's constitution, announced at last year's party conference, has brought him into conflict with the left and some sections of the trade union movement.
Meanwhile, Brian Wilson, a front-bench moderniser with links to the traditional wing of the party, outlined a 55-word text for a replacement Clause IV, designed to unite the party.
The wording has already won the support of around a dozen Scottish MPs from both wings of the Labour Party. Although the text is a "freelance" operation, close allies of Mr Blair have seen the draft and encouraged its dissemination.
Mr Wilson's proposed clause commits Labour members "to enhance the birthright of every citizen, to fulfil his or her potential, consistent with social justice and the equitable distribution of wealth; to cast out poverty, nurture enterprise and promote common ownership; cherish and advance democracy; all in order to bequeath to the next generation a better world than the one which we inherited''.
Support from several Scottish MPs for the text is significant, because the Labour leadership is expecting opposition to Mr Blair's Clause IV initiative at the Scottish Labour conference. Mr Wilson's version offers a potential lifeline to the left by its use of the term "nurture enterprise and promote common ownership''.
Mr Blair said yesterday that Labour required "both dynamic markets and strong public services; and that both public and private sectors should be properly responsible to the public good. On the basis of those principles, there will be a role for different types of ownership - private, public, co-operative and combinations of these. The issue of ownership will not be a matter of ideology, but of the best practical means to serve the public interest.''
In his speech, Mr Blair claimed that the debate over Clause IV was a "process not of destruction but rebirth'', which would "replace an icon fashioned by human hands for one age, with the spirit that motivates us and which lasts for all ages".
The Labour leader reiterated his commitment to the modernising principle by arguing: "For too long we allowed ourselves to be portrayed as being against enterprise and success, against people getting on and doing better for themselves and their families.
"We believe in success. We believe in enterprise. A just society cannot exist without its public servants and private entrepreneurs.
"These are our values. They have at their heart a commitment to a united and prosperous society and to the fair distribution of power, wealth and opportunity. They commit us to ensure that power, wealth and opportunity are in the hands of the many and not the few so that all can live in dignity and without fear''.
The issue will be resolved at a special conference to be held on 29 April. Before then, the Labour leader will be touring the country seeking backing for his stance.
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