Clerics who preach hate and Web sites or book shops that sponsor violence would be targeted. Foreign nationals could be deported under the new measures.
Blair said his government was prepared to amend human rights legislation if necessary if legal challenges arose from the new deportation measures.
Britain's ability to deport foreign nationals has been hampered by human rights legislation. As a signatory to the European Convention on Human Rights, Britain is not allowed to deport people to a country where they may face torture or death.
"Let no one be in any doubt that the rules of the games are changing," Blair said, promising to crack down on extremists blamed for radicalizing pockets of Muslim youth.
By the year's end, Blair wants to pass legislation that would outlaw "indirect incitement" of terrorism -- targeting extremist Islamic clerics who glorify acts of terrorism and seduce impressionable Muslim youth.
The law would ban receiving training in terrorist techniques in Britain or abroad. A new offense of "acts preparatory to terrorism" would outlaw planning an attack and activities such as acquiring bomb-making instructions on the Internet.
Blair said his government would hold a short, one-month consultation on new grounds for excluding and deporting people from the United Kingdom.
"The Muslim community have been and are our partners in this endeavor," said Blair, who has appealed to community leaders to help roots out extremists in their midst.