Mr Blanchard, 66, rose to prominence in the UK after he warned Chancellor George Osborne was "playing with fire" with the British recovery in 2013.
He now said he had a "gut feeling" a UK exit from the European Union would prove damaging for the economy and the financial sector.
"I think Brexit would be very costly to Britain and costly to Europe as well.
"I can see how some people are very fed up with Brussels, but that would be a very superficial reaction to just leave Europe because there are technocrats that you don't like."
For all his misgivings about the single currency, Mr Blanchard said the EU as a whole remained a "fundamentally good construction".
"It requires compromises, and sometimes countries don't get exactly what they want. But the benefits exceed the costs - the European Union is more than Brussels."
During his reign as chief economist, the IMF came under severe criticism over its handling of the Greek debt crisis. The Fund has yet to formally commit itself to a new €86bn bail-out as they push the likes of Germany to relent to significant debt relief for the battered economy.