Mr Putin made clear he was not ready to support the prime minister's call for an end to sanctions after talks at his private residence at Novo Ogarevo, 40km west of Moscow.
He argued that the United Nations should play a central role in post-war Iraq and also appeared to question whether Saddam Hussein really did have weapons of mass destruction.
The pair were hosting a news conference during Mr Blair's five hour trip to Moscow on Tuesday for a meeting which sought to heal rifts over the Iraq war.
The role of the UN should be not only restored but strengthened
Vladimir Putin
The prime minister announced that the two leaders would hold their next set of talks in St Petersburg during the city's 300th anniversary celebrations in late May.
Standing alongside Mr Putin, Mr Blair warned that the world faced a "real danger" if the international community did not put behind it divisions created by the Iraqi conflict.
Mr Blair said he believed a proper strategic partnership between Europe and the US "can be made to work but it requires goodwill".
"It requires a real vision and acceptance that this strategic partnership is the only alternative to a world in which we break up into different poles of power, acting as rivals to one another, with every single dispute in the world being played off against these different poles of power," he said.
"That is a real danger for our world."
Mr Blair stressed that control of Iraq could not simply be handed over to the UN while coalition forces were on the ground stabilising the situation.
But Mr Putin told reporters that now the war is over "the role of the UN should be not only restored but strengthened".
He argued that UN sanctions against Iraq should not be lifted until it was proved that the country did not possess weapons of mass destruction.
'Power vacuum'
"Russia has always supported easing and even lifting the sanctions, but our partners in the UN Security Council believe that as long as the issue of weapons of mass destruction has not been clarified, the sanctions should be maintained, and we agree with this position," said Mr Putin.
Calling for the UN weapons inspectors to return to Iraq, Mr Putin said: "Russia remains ready to play the most active role in supporting the UN inspectors in Iraq."
He stressed that the oil-for-food programme "must be supervised by the UN", given the "power vacuum in Iraq".
Earlier, Mr Blair warned that the rift which split Europe over the conflict must not lead to new Cold War.
Partnership
Mr Putin, along with his French and German counterparts, opposed the conflict and Tuesday's summit was part of efforts to heal diplomatic wounds as attention focuses on rebuilding Iraq.
Mr Blair told reporters on his flight to Moscow: "We have always had very good relations with Russia, but there's no point in ignoring the fact that the last few months have been a very difficult situation diplomatically.
"What we have to explore now is whether there is a basis for a proper strategic partnership, which we obviously want to see.
"It is important that we resolve some of the issues which are outstanding."
We are not going back into the rigmarole we had last time over the second resolution
Tony Blair
Last week France said it would agree to suspending UN sanctions towards Iraq - something which had been tipped as a potential sticking point in the Security Council.
Mr Blair said: "Obviously with Saddam gone, there is no reason why we should not be trying to lift them as soon as possible."
He stressed the kind of arguments seen before the Iraq war at the UN should not be repeated.
"Getting agreement at the UN is important, but we are not going back into the rigmarole we had last time over the second resolution," he said.
The world had to accept "the reality on the ground, which is that coalition forces are in control".
Mr Putin earlier this month held a summit with his French and German counterparts, to which Mr Blair declined an invitation.
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