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"People have got to understand that we are in an entirely different world now than we were even five years ago, said Blunkett, who is to give the opening keynote at Infosecurity Europe in London this week.
Blunkett believes that the true nature of cybercrime is little known and that people in the public and private sectors need to be more aware of the enormous threat.
Cyber attack could cause devastating disruption to the 2012 Olympic Games, but it is the missing element in the government's defence strategy, he said.
For this reason, the UK should user the London Olympics as a rallying point to set the standard for tackling national cybersecurity.
This will meet the dual need to ensure that the cyber threat to the 2012 Olympics is dealt with properly and that Britain provides a safe environment for doing business online.
"We need to put cyber alongside chemical, biological and radiological threats," said Blunkett, but three years is a very short time to get everything sorted out, he warned.
"We need to be ahead of those who would damage us rather than a step behind," he said.
Blunkett believes that although government needs to take the lead, the way to success is through partnership with business and security suppliers.
Government cannot do it alone and must therefore be willing to listen to experts at home and abroad as part of the process of building cybersecurity for the future.
Business must ensure they have right processes and technology in place and the security industry must help them to achieve this, said Blunkett.
"The information security industry has a responsibility to make tools meaningful and accessible and must understand that this has to be part of a broader process," he said.
At Infosec, he plans to issue a call to action by government, the security industry, business and the public to increase awareness and co-operation around cybersecurity.
Proving the UK is able to secure major events like the Olympics and tackle problems like online fraud, could help establish it as a world e-commerce hub, said Blunkett.