Mr Blunkett told the North of England education conference in York that now schools managed their own budgets there was no substantial difference between local authority and opted out schools.
"It is not beyond the wit of man or woman to build on local management schools so that we can try to give all schools a comprehensive admissions policy.''
He said in a statement: "Over the coming months I will be talking to teachers, governors, parents both from the local authority sector and grant maintained schools. Labour's White Paper spoke about a local democratic framework. It is my task to build a consensus around this concept embracing all who wish to contribute to that debate about the way forward.''
Headteachers said the speech appeared to signal Labour's acceptance of grant maintained schools. And they demanded the party come clean on its policy on opting out.
Labour's confusion over opting out was revealed last month when it was disclosed that Tony Blair's son was to attend an opted out school. At the last election the party said it would return opted-out schools to local authority control.
Mr Blunkett shrugged off recent troubles in which he appeared to be at odds with the party leadership over the issue of VAT on private school fees. "I have broad shoulders,'' he said.
He spoke of the central role of local authorities as champions of their communities but accepted that they had been too bureaucratic in the past.
He advocated a new partnership between schools and local authorities with councils using a lighter touch.
"The partnership must be flexible so the schools can choose those services which they can provide themselves and those which would be better offered by the local education authority.''
He appealed to local authorities to be imaginative about the partnership. "There has been much exaggeration about the extent of Town Hall bureaucracy in the past but there has also been truth in it.''
Mr Blunkett supported a drive for higher educational standards as the key to fighting disadvantageand deprivation. "The patronising benevolence of some towards under-achievement has only reinforced inequality.''
Don Foster, the Liberal Democrats' education spokesman, told the conference that grant maintained schools and city technology colleges should be returned to local authorities.
He opposed the removal of charitable status from independent schools, which Labour has said it is contemplating. Instead, he said, giving charitable status to state schools should be considered.
He also opposed the introduction of VAT on school fees.David Hart, general secretary of the National Association of Head Teachers said: "Grant maintained school heads among our members need assurances that a Labour government would not abolish their schools.''Reuse content