Blair's statement came as Iraq's prime minister said the United States asked him to delay the exectution by 10 days to two weeks.
Nouri al-Maliki, speaking in an interview with Al-Arabiya television, said he refused the request from Zalmay Khalilzad, the U.S. envoy to Baghdad, because "We did not want to keep a door open for trouble. We did not want the families of the victims to go out and demonstrate."
Blair told a London news conference he hoped disputes over the taunting of the former Iraqi dictator and the release of illicit video footage of the execution would not lead people to forget the gravity of Saddam's crimes.
"The crimes that Saddam committed does not excuse the manner of his execution, but the manner of his execution does not excuse the crimes," Blair said, during a joint news conference with visiting Japanese Prime Minister Shinzo Abe.
Blair said he hoped issues surrounding Saddam's execution would not "blind us to the crimes he committed against his own people."
Saddam was responsible for the "death of hundreds of thousands of innocent Iraqis, 1 million causalities in the Iran-Iraq war and the use of chemical weapons against his own people, wiping out entire villages," Blair said.
"The manner of the execution is unacceptable and it's wrong, but we should bear in mind and not allow that — while saying it's wrong — to lurch us into a position of forgetting the victims of Saddam, the people that he killed deliberately as an act of policy," Blair said.
The British premier had faced public criticism after choosing not to immediately comment on the execution.
Both Blair's deputy John Prescott and expected successor Treasury chief Gordon Brown had publicly criticized the hanging, but Blair declined to answer questions on the matter after returning from a holiday in Florida last week.