Blair's office said in a statement that it would work "urgently" after the Nov. 26 ballot to resolve the disagreement that occurred last week as officials announced what they had expected to be a breakthrough in peace negotiations.
The deal, intended to pave the way to reviving a joint Catholic-Protestant administration in the British territory, stalled when the Ulster Unionists, the major British Protestant party, rejected an IRA arms decommissioning move as too shrouded in secrecy.
"What we are saying today formally, from the British government, is we are not going to be able to reach agreement," the statement from Blair's office said.
The statement emphasized that the IRA and Sinn Fein, the IRA-linked political party, had made important moves and that the elections would proceed as scheduled.
"We regret very much that despite the significant developments in the peace process last week and further progress over this past weekend, it has not proved possible to resolve all the differences that emerged on the issue of decommissioning and move forward into the election on the basis of agreement," the statement said.
It said the sticking point that emerged last week remained — the British Protestant party's dissatisfaction with the lack of openness about the IRA's moves to decommission weapons, which were overseen by an official international observer.
Britain suspended Northern Ireland's power-sharing assembly, the central element of the 1998 Good Friday peace accord, last year after police uncovered evidence of IRA spying operations.
It appeared negotiators had achieved a breakthrough last week in stalled talks to revive the assembly, when Blair's office announced elections for next month and the IRA said it had disabled some of its weapons.
But what began as a triumphant day turned sour when Ulster Unionist party leader David Trimble rejected the disarmament as too secretive. Trimble's party is a moderate Protestant group that has sat in government with Sinn Fein in the past.
John de Chastelain, a retired Canadian general who has served as Northern Ireland's independent disarmament chief since 1997, confirmed he had overseen the removal of a substantial amount of IRA weaponry, but could not discuss details.
Trimble pulled back from his plans to declare his willingness to revive cooperation with Sinn Fein, the IRA-linked party, following the upcoming legislative elections.
He said he was willing to back resumed power-sharing only if the IRA offered details of the volume of weaponry it has surrendered since October 2001 and would pledge to complete the process by a specific target date.
Blair said he knew some details of the arms the IRA surrendered but was not at liberty to disclose any information. A senior Irish police officer told The Guardian that almost 112 tons of weapons had been destroyed, and that more than a third of the IRA's arsenal had now been rendered useless.
Sinn Fein leader Gerry Adams blamed the Ulster Unionists for rejecting a deal that had been months of negotiations in the making.
Trimble has faced down numerous challenges from more conservative elements within his party who do not support broad cooperation with Sinn Fein. The UUP itself faces competition from the Democratic Unionist Party of Ian Paisley, which rejects any compromise with republicans.
Supporters of the peace process have worried over the past year that if Trimble's UUP lost the confidence of mainstream Protestants, they would give more power to the DUP, all but ending the Good Friday agreement.