During the seven-minute meeting with Blair, Shilpa thanked him for the support he had extended against racism, of which she was allegedly a victim in the reality TV show.
Blair told Shilpa that he was sorry for what had happened in the show.
The luncheon, organised by Labour MP Keith Vaz, also a NRI leader and a former minister, was attended by several MPs, including Peter Hain, Secretary of State of Northern Ireland. Shilpa also witnessed the Prime Minister's Question Hour.
Asked about her impression of the Question Hour, Shilpa said it was more interesting than she had envisaged.
"It feels great, such an honour. This was what we always saw on the postcards. It's so great just to be here," she said in front of Big Ben and the Palace of Westminster.
"There can't be a bigger honour, so much respect to be bestowed upon me." Answering a question from reporters on whether she had an offer to act with British actor Huge Grant, she said this was only a rumour.
She said she had received several offers but has not reached any agreement on them.
Asked about her future plans, the 31-year-old actress said she can not leave India and Bollywood. Shilpa, who was accompanied by her mother Sunanda and Vaz, said she was keen to return to India at the earliest.
To another question, she said she would contribute part of the money she received as a sequel to her appearance in the "Celebrity Big Brother" show to a foundation she has set up for helping Aids Victims in India.
"Aids is a major disease and India has the second highest number of Aids victims and I would like to create awareness of the plight of Aids victims not only in India but all over the World," she said.
To a question on racism, Shilpa Shetty said her tormentors in the Big Brother house Jade Goody and others were not racists though she was a victim of bullying.
"I believe in Gandhian philosophy and we in India are quite tolerant".
Later Shilpa left for Leicester the parliamentary constituency of Vaz where she will attend in a series of functions.