Prime Minister David Cameron has revealed the sum came from Britain's Department for International Development, which works to "eliminate world poverty", the 'Daily Express' newspaper reported.
But, it was spent on rooms at the exclusive American Colony Hotel in Jerusalem, where Blair spends one week a month in his role as peace envoy to the Middle East, the British newspaper claimed.
The 19th century hotel near the old city of Jerusalem is one of the most exclusive in Israel. A suite costs 550 pounds a night, the newspaper said.
The cash was paid in 2007 as Britain's contribution to Blair's work representing the EU, America, Russia and the United Nations.
Tory MP David Amess, who is campaigning to stop Blair getting any more, said: "The DfID should not be giving him money. It should be spent on the world's poor and on investment in developing countries. This is the guy who told us a pack of lies and went to war with Iraq."
However, Blair's office was unavailable for comment, the newspaper said.
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