He stood by the dossier, which said Iraq could deploy weapons of mass destruction within just 45 minutes.
"We described the intelligence in a way that was perfectly justified," said Blair, only the second prime minister to be summoned before a judicial inquiry.
However, Blair, whose public trust ratings have plunged during the inquiry, acknowledged he was under intense pressure to make a strong case for disarming Iraq.
"The clamour for us to produce evidence was very strong," he said. "We had to disclose what we knew because there was an enormous clamour... it was important it (the dossier) made the best case we could have..."
While no smoking gun has emerged, the inquiry has laid bare the workings of government in unprecedented fashion.
No evidence has emerged to support the "sexed up" claim but with no banned weapons found in Iraq, the government's case for war and handling of its aftermath remain under intense scrutiny.
The government has come under fire for the way it handled weapons expert David Kelly, the main source for the BBC report.
Kelly, a soft-spoken scientist unused to the public eye, killed himself last month, just days after being publicly grilled by politicians in Westminster.
Scores of people set up camp outside the court overnight to see Blair give evidence. As the prime minister arrived, anti-war protesters brandished placards styling Blair as a "most wanted" criminal and "B.Liar".
While nobody expects the government to fall, political opponents say Blair's standing with the public is now at stake.
"The prime minister must cast aside the culture of spin and deceit at the heart of government and come clean about the events and individuals responsible for the naming of Dr Kelly," said Conservative defence spokesman Bernard Jenkin.
The only other serving British prime minister to appear before a judicial inquiry was Blair's Conservative predecessor John Major in 1994. That probe also concerned Iraq, and illegal arms sales to Saddam Hussein before the Gulf War of 1991.
- REUTERS
Hutton inquiry website
British Parliament Foreign Affairs Committee transcript:
Evidence of Dr David Kelly
Key players in the 'sexed-up dossier' affair
Herald Feature: Iraq
Iraq links and resources