While there is talk of the lecture circuit, or an advisory role to spur African development or peace in the Middle East, it is more likely he will start an interfaith foundation, much like that of U.S. President Bill Clinton's.
"He has felt frustrated that his Christianity and his reverence for Islam was neither understood nor given a proper voice during his time as prime minister," said Anthony Seldon, a Blair biographer. "This will give him that platform."
Blair, a Protestant, is said to carry the Quran with him regularly.
Britain's large Muslim population - 1.6 million - rallied behind Blair when he came to power in 1997. But since the Sept. 11 terror attacks, many have said they feel unwelcome in their own country.
The terror attacks in the United States in 2001 ushered in a raft of anti-terrorism legislation to Britain. Police were granted broad search powers. Terror suspects could also be held longer before they were charged or released.
Relations have worsened with Britain's involvement in the Iraq war.
Suicide bombers who targeted London's transit system in 2005 and killed 52 people released a video in which they accused Britain of declaring war on Islam. It was Europe's first suicide bombings.
"The tragedy is that as Christians, Jews and Muslims we are all Abrahamic religions," Blair said last year on a visit to Indonesia, which has the world's largest Muslim population. "We regard ourselves as children of Abraham but we have fought for so long."
Last year Blair met Pope Benedict XVI to look at how dialogue could help bridge the divide between Christians, Jews and Muslims.
A foundation could also give Blair an avenue for other projects close to his heart, including measures to tackle climate change, African development and the Middle East peace process.
Blair was one of the first British prime ministers to put climate change measures and debt relief to Africa on the agenda at a Group of Eight nations summit in 2005.
He has tried to jump-start the peace process in the Middle East, supporting an international conference on Palestinian reform.
It is unclear how the foundation would be funded.
Aides say that Blair will stay on as a member of Parliament in his constituency unless a job takes him away from Westminster.
Salaries for members of Parliament vary depending on seniority.
The prime minister earns 127,334 pounds a year (US$253,674; EUR187,420), where an ordinary member of parliament earns about half as much: 60,277 pounds (US$120,083; EUR88,720). Salaries are higher for whips, the speaker, or cabinet ministers.