Pakistani president Mr Pervez Musharraf has made his strongest statement yet against terrorism and hinted at further action on Islamic militants.
But with India demanding the handover of 20 militants after a December 13th attack on its parliament, there was little sign of an early end to a tense standoff between the nuclear rivals.
Mr Musharraf said final decisions still had to be taken in connection with the crackdown on militants based in Pakistan and that all would be revealed when he addressed the nation in a few days.
"Pakistan rejects terrorism in all its forms and manifestations and has fully cooperated with the international coalition against terrorism in that spirit," Mr Musharraf told a joint news conference with Mr Blair.
It was the first time that he has explicitly rejected all terrorism. Mr Blair welcomed his words as a step towards cooling tempers on the border, where both sides have massed troops and armour in their largest military build-up in 15 years.
But Musharraf also blamed India over the standoff: "I have informed the prime minister of the dangerous military build-up on our border and the belligerent statements emanating from India," he said.
Pakistan has arrested scores of Islamic militants, including leading members of the two groups India links to the parliament attack, but India says it must do more.
Pakistan traditionally supports what it calls freedom fighters battling to end Indian rule in Kashmir, which was the cause of two of the three wars between the neighbours.
India holds 45 percent of the disputed Himalayan region and considers this an integral part of territory.
Pakistan, which administers just over a third of Kashmir, insists the Kashmiri people should be given the right to decide their own future. It says a UN resolution calling for a plebiscite should be implemented. China also holds a slice of Kashmir.