Lawmakers voted 316-311 in favor of the legislation, offering Blair a welcome boost before Wednesday's publication of a report on the death of weapons adviser David Kelly (search), which added to a furor over the government's case for the Iraq war.
Blair sat on the government front bench in the House of Commons as the result of the vote was announced to loud cheers from Labour lawmakers.
Ministers had embarked on an intense last-minute campaign to win support for the bill, which is the centerpiece of Blair's legislative program.
Many Labour lawmakers had viewed the proposals as a betrayal of a 1997 election promise that there would be no tuition hikes, and the bill crystallized party divisions over the direction of government policy. A defeat would have been Blair's first in Parliament since taking office in 1997.
Clare Short, an outspoken critic of Blair since she quit the Labour government last year, said the bill on university fees was a "breach of trust with the electorate" and "very foolish politically."
An early edition of Wednesday's Sun newspaper said it had obtained details of the report, saying it clears Blair of any dishonorable conduct, rebukes the Ministry of Defense for failing to let Kelly know that his name would come out, and harshly criticizes the BBC for failing to check facts before broadcasting its report.
Under the bill approved Tuesday, universities would be able to charge students up to $5,500 a year, to be paid after they leave school and start earning wages.
Colleges currently charge a flat-rate fee of $2,025 which is paid up front. The government says the increase would provide an extra $1.8 billion a year for higher education.
Education Secretary Charles Clarke has also pledged scholarships for poorer students and promised a system to help ensure that more people from working class backgrounds enter higher education.
Clarke conceded that his authority and that of the prime minister had been on the line over the proposals to increase university fees.
"I am delighted at the result," Clarke said. "Had we lost it would have been a very serious state of affairs."
Tuesday's vote meant the bill passed its second reading, which is an agreement on its basic principles. It next goes before a committee of lawmakers who consider the legislation in detail and suggest possible changes before submitting it to a third reading in the Commons.
If approved at that stage, the bill moves to the House of Lords, which can delay or amend the legislation but not block it. The proposal becomes law after winning the backing of both houses and receiving royal assent.
Doubts about the war in Iraq will be back in sharp focus on Wednesday, with the publication of Lord Hutton's report on the apparent suicide of Kelly, the weapons scientist who was identified as the source of a report questioning Blair's case for war in Iraq.
Hutton, a senior appeals judge, held hearings on the preparation of the government's intelligence dossier in September 2002, which warned of the dangers of Iraq's weapons of mass destruction.
he report could also have serious consequences for the British Broadcasting Corp., which has acknowledged errors in its reporting of Kelly's comments about the government dossier.