The Kuala Lumpur War Crimes Tribunal, part of an initiative by former Malaysian premier Mahathir Mohamad -- a fierce critic of the Iraq war -- found the former leaders guilty after a four-day hearing.
"The Tribunal deliberated over the case and decided unanimously that the first accused George Bush and second accused Blair have been found guilty of crimes against peace," the tribunal said in a statement.
"Unlawful use of force threatens the world to return to a state of lawlessness. The acts of the accused were unlawful."
Mahathir, who stepped down in 2003 after 22 years in power, unveiled plans for the tribunal in 2007 just before he condemned Bush and Blair as "child killers" and "war criminals" at the launch of an annual anti-war conference.
A seven-member panel chaired by former Malaysian Federal Court judge Abdul Kadir Sulaiman presided over the trial, which began last Saturday, and both Bush and Blair were tried in absentia.
"The evidence showed that the drums of wars were being beaten long before the invasion. The accused in their own memoirs have admitted their own intention to invade Iraq regardless of international law," it said.
The verdict is purely symbolic as the tribunal has no enforcement powers.
The tribunal is also expected to later hear torture and war crimes charges against seven others, including former US secretary of defence Donald Rumsfeld and former vice president Dick Cheney.