He is expected to be asked about apparent discrepancies between his previous evidence and comments by former Attorney General Lord Goldsmith.
Lord Goldsmith told the inquiry he was "uncomfortable" about statements made by the then PM before the conflict.
Anti-war demonstrators are expected to protest outside the London inquiry.
The inquiry, led by former civil servant Sir John Chilcot, is looking at the UK's role in the run-up to the invasion and the aftermath of the war.
When he first appeared before the panel in January 2010, Mr Blair said he had "no regrets" about having taken the UK to war and believed the world was a safer place after Saddam Hussein had been overthrown.
BBC correspondent Peter Hunt said the encounter between Mr Blair and the committee had the potential to be a "testing affair" for both sides.
"Tony Blair is unlikely to want to deviate from the main thrust of last year's testimony," he said.
"For their part, the inquiry team will want to prove their critics wrong by effectively cross-examining Mr Blair."
Mr Blair's evidence session at the Queen Elizabeth II Conference Centre is to last more than four hours.
The questioning is expected to focus on apparent differences between Mr Blair's previous evidence on the legality of the war and comments made to the inquiry subsequently by Lord Goldsmith.
Lord Goldsmith, who as Attorney General advised the government on legal matters, advised Mr Blair on 14 January 2003 that UN Security Council resolution 1441 was not enough on its own to justify force against Iraq.
But the next day Mr Blair told MPs that, while a second UN resolution was "preferable", there were circumstances in which it was "not necessary" - in the event of the use of an "unreasonable veto" by a Security Council member.
According to fresh written evidence released by the inquiry this week, Lord Goldsmith said he was "uncomfortable" about this statement.
The invasion eventually went ahead without a second UN resolution.
Mr Blair's spokesman has said he will deal with the former attorney general's comments during his appearance on Friday.
The ex-prime minister is also expected to be asked about private conversations he had with President Bush over Iraq and about intelligence on the threat posed by Iraq.
Sir John said earlier this week the inquiry panel was "disappointed" the government would not allow the public release of details of these talks.
Mr Blair's previous appearance prompted demonstrations at Westminster, although the former prime minister arrived hours before the start and avoided any confrontation.
Similar protests are expected later.
Chris Nineham, from Stop the War, said: "Evidence has now emerged at Chilcot showing Blair lied to public and Parliament about the legality of an attack on Iraq.
"Finally it has been confirmed that the war in Iraq was criminal as well as catastrophic.
"There is no more excuse for Blair to escape justice, and certainly no possible argument for him to continue as UN Peace Envoy in the Middle East."