In an interview with Argentine publication La Nacion, the 80-year old former world football supremo said that the balls containing the names of teams were either heated or cooled to help those picking them out the pot to identify them.
Blatter refused to identify the tournament in question, but said that only one team had ever successfully benefited from such tactics.
“It was an Italian team,” he said.
Asked whether draws had been rigged, Blatter replied, "Yes. I saw it with my own eyes and it was like cheating.
"It was for a European competition. Only one team has managed that. It was an Italian side.
"You can see the balls that are drawn identified either by making them hot, or if they have been cooled. I was a witness."
Blatter went on to say that he was never directly involved in the alleged cheating, despite being witness to it.
"I’ve never drawn lots," he said. "Other presidents did. They have taken the balls themselves from the pot.
“I was clean to the last,” he added.
Blatter was suspended from office in October amid allegations of widespread corruption within FIFA’s ranks. He has always denied any direct involvement in illegal behaviour.
Earlier this month it was alleged that former top FIFA officials including Blatter, Jerome Valcke and Markus Kattner awarded themselves pay raises and World Cup-related bonuses totalling $80-million during their last five years in office.