The former prime minister was photographed leaving a Mayfair restaurant 10 days after his return from Washington DC via private jet last month, The Sunday Telegraph reported.
Sources told the newspaper that Mr Blair, 67, had requested special exemption from the two-week travel quarantine rules but Whitehall did not issue him with the formal dispensation required.
The ex-Labour leader allegedly claimed he was advised to follow rules on attending “international conferences”, having travelled to the US for a ceremony at the White House.
However, the “international conferences” exemption applies to diplomats, staff at international bodies and formal representatives at international conferences who have been “granted privileges and immunities”.
Mr Blair is considered a private citizen.
A spokesman for Mr Blair said the event he attended was a “diplomatic conference” which saw Israel sign agreements establishing formal relations with Bahrain and the UAE.
The spokesman told the paper that the former Prime Minister and Middle East envoy was invited by the US government because of the role he played in brokering the agreement.
He also insisted that the 67-year-old “posed no risk to anyone” as he was tested before his departure, on arrival at the White House, and several times since returning to the UK.
“We believe he followed all UK and US government guidelines as advised, the spokesman added.
But David Jones, a Conservative member of Parliament’s public administration committee, rebuffed Mr Blair’s defence, saying: “It sets an appalling example to travellers if a former prime minister appears to flout the rules in such a flagrant manner.”
It comes just weeks after Mr Blair gave an interview in which he criticised the UK’s coronavirus rules as “not very clear”.
He told CNBC in June: “The main thing is to have the rules clear, and some of them, frankly, like the ones of quarantining when people come into the country now, are really not very clear.”
Last month, Mr Blair urged the Government to bring in mass testing at airports and slash self-isolation time to five days as an “alternative” to blanket quarantine rules, insisting it would have “significant benefits both to individuals and the economy”.
Currently anyone arriving in the UK from overseas must self-isolate for 14 days unless they have travelled from one of the few territories on the official “travel corridor” list.
This does not include the US.
Those failing to follow the rules face fines of £1,000 fine or even prosecution.
Mr Blair’s spokesman told The Telegraph: “He was not refused exemption by the UK Government.
“He was told to follow the guidance on international conferences, which he did; the US Government had cleared the visit because it was for the diplomatic conference at the White House.”
A Foreign Office spokesperson said that the Government department “provides travel exemptions to diplomats travelling on business relating to the interests of the UK, representatives of international organisations, and their families and dependants.”
“Those issued an exemption will not need to self-isolate,” he added.