The charge arose over the 2005 shooting of Jean Charles de Menezes, a Brazilian man mistakenly believed to be a terrorist, The Observer reported.
De Menezes was shot seven times in a train station last July, one day after bomb attacks in London. He was mistaken for a terrorist, partly because he was carrying a backpack.
Until now, the investigation has focused on the officers who shot de Menezes, but as senior commander, Blair may have been responsible, the CPS told the Observer.
Blair is the subject of a separate inquiry into allegations he misled the public over the shooting of de Menezes. Two other senior officials are indicted in connection with the incident.
A decision is expected from the CPS within two weeks, the Observer said.