The letter from the Work and Pensions Secretary was written on notepaper bearing the portcullis logo, which is supplied to MPs under strict rules that say it must be used only for legitimate parliamentary business.
Mr Blunkett wrote to Wandsworth council, in south London, about the impact a proposal to build new flats and houses could have on the local environment. The money raised from the development is to be used to pay for £4m worth of improvements to the nearby Linden Lodge School for the blind and partially sighted.
A spokesman for the minister said the breach was "simply an administrative matter". Mr Blunkett dictated the letter to his office without specifying it was to be sent on plain paper.
But it is a setback for Mr Blunkett, who has been struggling to keep his personal life out of the news and focus attention on his plans for welfare reform.
A television play based on his affair with the socialite Kimberly Quinn was broadcast on Channel 4's new channel, More4, on Monday. The fallout from that affair forced Mr Blunkett to resign from the Cabinet last December but he was brought back in his present role after the general election in May. Mr Blunkett, who is divorced, has recently been romantically linked to an estate agent, Sally Anderson, 29, who sold her story to a newspaper.
The Commons rules specify "the Crowned Portcullis is a royal badge" and should not be used "when it might wrongly be regarded or represented as carrying the authority of the House when this is not the case".
Mr Blunkett's spokesman said: "The letter was dictated to his office. It was never his intention that House of Commons stationery be used. This was an honest mistake. In retrospect, Mr Blunkett recognises he should have explicitly specified that the letter went on plain paper, which is what he always intended."
The minister wrote to the council, objecting to a loss of "shrubbery and foliage", according to yesterday's London Evening Standard. He said he was "deeply concerned about the effect on wildlife, on the quiet enjoyment of the area and on the ecology". He called himself "a former resident" without saying he still owns the former council house, which he bought shortly after he was elected to Parliament in 1987.
Ravi Govindia, chairman of Wandsworth planning committee, said: "It would have been better if he had... objected as a property owner concerned about the value of his house rather than appear to be hiding behind environmental concerns."
Mr Blunkett's spokesman said he does not oppose the development, but had expressed his environmental concerns "after being approached by local residents".