Speaking at the Congress of European Socialists, in the Swedish city of Malmo, Mr Blair will challenge his partners to abandon the "statist" policies of the old left or risk losing the trust of European citizens.
He will tell other leaders: "Our task is not to go on fighting old battles but to show that there is a third way. A way of labour market flexibility and security in a world of change."
He will warn: "We have no more divine right to govern than the parties we oppose."
The Prime Minister will also speak bluntly to fellow Europeans about his deep disillusionment with European policy-making after just one month in office. In an attack which will shake several of the architects of the European Union still in power, Mr Blair will tell them institutions they were constructing were "impossibly remote from the people".
The criticism comes as EU heads of state finalise details for a new treaty on EU reform, to be signed in under two weeks in Amsterdam.
Wim Kok, Prime Minister of the Netherlands, which holds the EU presidency, held out hope yesterday that consensus on the shape of the new treaty was now within reach. But Mr Blair will tell the Socialists today: "We must stop talking about European theology and start doing things from which real people see real benefits.
"Am I satisfied with Europe? Frankly, no."
The Prime Minister's address will be viewed in some quarters of Continental Europe as an unwarranted piece of lecturing by one of the Union's newest leaders. However, riding high on a wave of popularity after his landslide victory, Mr Blair's credentials as "a winner" have won him seemingly boundless goodwill.
Mr Blair clearly chose the Socialist Congress as the moment to try to take the reins in Europe at a time when a Socialist revival is being widely predicted. Lionel Jospin was swept to power as the new French Socialist Prime Minister this week.
Wary of much of the old Labour thinking still present in Mr Jospin's discourse, Mr Blair will take the chance to reject what he believes are "rigidities" and "inflexibilities" in favour of a Europe geared to "employability and job flexibility".
Much of the agenda matches New Labour economic policy at home. Mr Blair believes he is now in a position to sell his modernising message abroad, and will attempt to persuade other Europeans that their own countries are already moving towards his radical approach.
"Parties which seize this opportunity will be the parties of the future," will be his message.
The Prime Minister is also expected to admit that the previous Conservative government were correct in advocating labour market flexibility and an end to employment red tape. He will tell the conference: "The right got a lot wrong, but they were right about the need for flexible labour markets. What they got wrong was the failure to equip people with skills to adapt to change and they refused to see the need for minimum standards in the workforce."