The Middle East peace envoy will receive the Dan David Prize for “his exceptional leadership and steadfast determination in helping to engineer agreements and forge lasting solutions to areas in conflict”.
The award is presented by the Dan David Foundation, which is based at Tel Aviv University. Previous recipients include former US presidential candidate and environmental campaigner Al Gore and playwright Tom Stoppard.
A spokesman for Mr Blair said the money will be donated to the former Labour leader’s charity for religious understanding.
Mr Blair is an envoy of the international Quartet on the Middle East peace process, which comprises the US, European Union, United Nations and Russia.
His entry as a Dan David laureate on the prize’s website hails him as “one of the most outstanding statesmen of our era”.
It praises his role in the Northern Ireland peace process and his “steadfast determination and morally courageous leadership” over Kosovo, but there is no mention of the controversial decision to support the US-led invasion of Iraq.
The citation states: “Early in his prime ministership, he came to two beliefs that guide him to today: first, that it is a mistake for the world to wait for America to solve all of the tough questions, and second, that there are some things a state may do within its borders that justify intervention even if the actions do not directly threaten another nation’s interests.”
The award will be presented in a ceremony on May 17 at Tel Aviv University.