He said resisting demands for Cardiff and Edinburgh assemblies would have increased demand for independence.
But Mr Blair said he did not understand in the late 1990s the need to maintain cultural unity between the different parts of the United Kingdom.
The admissions are contained in a new book, 'British Labour Leaders'.
Interviewed by the book's editors, ex-cabinet minister Charles Clarke and University of East Anglia politics lecturer Toby James, Mr Blair said: "I did feel that we made a mistake on devolution.
"We should have understood that, when you change the system of government so that more power is devolved, you need to have ways of culturally keeping England, Scotland and Wales very much in sync with each other. We needed to work even stronger for a sense of UK national identity.
"But I don't accept the idea that we should never have done devolution. If we had not devolved power, then there would have been a massive demand for separation - as there was back in the 60s and 70s."
The book is published on 8 September.
Ex-Prime Minister Tony Blair has said he failed to do enough to ensure Welsh and Scottish devolution did not undermine the UK's national identity.