He made his Scotland debut against Canada in the same year and went on to become a mainstay for the nation, becoming Scotland's most-capped scrum-half, with 80 caps to date, and earning selection for the British & Irish Lions tour of South Africa in 2009.
In ten seasons Blair has made 158 competitive appearances for the club, his 50th in the Heineken Cup coming in the club's quarter-final win over Toulouse last Saturday.
Speaking on his decision, Blair said: "Being born and raised in Edinburgh, I've played all my rugby here and have been committed to Edinburgh Rugby my entire professional career.
"It's been an honour to represent the club which, over the years, has helped me fulfil my ambitions of becoming a regular for my country and earning selection for the Lions.
"I've enjoyed myself so much here and feel I've achieved a lot, which has made this a very hard decision to make, but the time is right for me personally to throw myself at a whole new challenge.
"Rugby offers many opportunities and experiences and, while I believe that this may be one of the most exciting times to be an Edinburgh Rugby player, I don't want to regret not trying something different when I finally hang up my boots.
"I'd like to thank all of the supporters who have been great to me since I first joined. I'm absolutely committed to Edinburgh Rugby until the end of the season and will do everything in my power to go out on a high, while I remain absolutely committed to playing for Scotland."
Edinburgh Rugby head coach, Michael Bradley, added: "On behalf of the club and the coaches, past and present, I'd like to thank Mike [Blair] for his long-standing commitment to the club.
"He's one of the most naturally gifted scrum-halves of this era with a fantastic eye for a break. He is a top-class controller of the game.
"He's been an incredible servant to Edinburgh Rugby and Scotland for a decade and we wish him all the best in the seasons ahead."
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