After retiring from basketball as a player, Blatt became assistant manager for Hapoel Galil Elyon, coaching them for the 1993–94 season. In the middle of the season, the head coach was sacked and he took his place. Next season he became Pini Gershon's assistant in the 1994–95 season. In the following year, he won the title of Israeli "Coach of the Year" for 1996, and, in 1997, he continued coaching at Hapoel Galil Elyon while also becoming the assistant coach of the Israeli National Team.
Blatt returned to coach Galil Elyon and remained assistant manager of the Israeli National Team for the next 2 years (1997–99).
For the 1999–00 season, he moved to Maccabi Tel Aviv and once again served as assistant manager to Pini Gershon. During this season, his team took part in the Israeli League and Israeli Cup (won both) and also in the Euroleague, where Maccabi finished in 2nd place.
In the years between 2000–2004, he continued as assistant coach under Pini Gershon and actively recruited foreign players such as Anthony Parker (in 2000) and Maceo Baston to the team. During those 4 years, Maccabi won one Euroleague title, reached the Euroleague Final Four (2001–02 season), and reached the final stage of the Adriatic League. Maccabi won the SuproLeague title in 2001, which was held in Paris. Blatt was still working as assistant coach of the Israeli National Team in 2002, when he won the title of Israeli "Coach of the Year" for the second time, the year he was appointed head coach of Maccabi Tel Aviv.
Despite two years as head coach with all possible domestic titles and one Euroleague Final Four appearance, for the 2003–04 season, he agreed to be demoted to assistant coach once again when Pini Gershon came back to the head coach position. Together, they led one of the best teams in Maccabi Tel Aviv history, and the history of European basketball, to another Euroleague title with a 44-point win in the final, as well as the Israeli Championship and the Israeli Cup.
In 2004, he moved to Russia and signed on as head coach with Dynamo Saint Petersburg. During this year, he won the FIBA EuroCup championship with Dynamo and also the title of "Coach of the Year in Russia" (2004–05 season).
For the 2005–06 season, he signed on as head coach of the Israeli national basketball team, but his appointment fell through due to the lack of a formal coaching certificate. He left Israel to become head coach of Benetton Treviso of the Italian League, and subsequently led them to the Italian Championship through a 3–1 victory in the final series of the Italian playoffs. In the same year, he was also appointed the head coach of the Russian national basketball team.
In 2008, with Ettore Messina then announcing that he would leave CSKA Moscow, Blatt was considered to be the favorite to replace him, but Messina eventually stayed on as CSKA's coach and Blatt agreed to the offer to become the head coach of Dynamo Moscow instead. Although under contract for two seasons, he parted ways with the team, after requesting that from team in order to pursue his career elsewhere. In early 2010, Blatt served a stint as the head coach of the Greek League club Aris Thessaloniki, before moving on to coach Maccabi Tel Aviv once again. Blatt led the Russian national team to a bronze medal during the 2012 London Olympics.
In 2014, Blatt led Maccabi Tel Aviv to one of the greatest comebacks against CSKA Moscow in the Euroleague semifinal game, proceeding to win the championship after beating Real Madrid in overtime. In June, after his contract ended, Blatt officially parted ways with the club in order to seek an NBA coaching position. Over four years as Maccabi head coach, he compiled a 208–55 record. On June 20, 2014, Blatt was hired to be the head coach of the Cleveland Cavaliers. Following his assignment in the Cavaliers, Blatt was named the EuroleagueCoach of the Year.