Lord Hague said the Prime Minister should be “bold” and change the laws surrounding the substance, saying a “major change” in policy was needed.
In an interview with the Telegraph, published on Tuesday, he warned that it is “deluded” to take the view that the drug will be “driven off the streets”.
The Government's initial refusal, and then its change in stance, on giving the boy, 12, the medication, prompted renewed debate on legislation this week.
The boy’s mother Charlotte Caldwell has also called for a meeting with the Home Secretary to discuss re-thinking "massively outdated" laws on medical marijuana so other children can receive treatment.
Mrs May is facing increasing political pressure to review the law on cannabis after a raft of MPs, now including Lord Hague, called for reform.
His comments came after Health Secretary Jeremy Hunt suggested "a different way" was needed following widespread outrage over the confiscation from mother Ms Caldwell of cannabis oil supplies which she brought from Canada for her 12-year-old son Billy, who has acute epilepsy.
After Billy was rushed to Chelsea and Westminster Hospital on Friday night in a critical condition, having suffered multiple seizures, Home Secretary Sajid Javid granted a 20-day emergency licence allowing use of the oil.
On Monday, fellow Tory Crispin Blunt, who chairs the All-Parliamentary Group for Drug Policy Reform, urged the Home Office to "clear out of the way" and let the Department of Health take control of policy on medical cannabis.
The Government announced a new expert panel of clinicians would be established to give swift advice on the prescription of cannabis-based medicines to individual patients.
But Mrs May suggested that the Government would look only into the operation of the current system of licences for use in individual cases, rather than reviewing the law more widely.
The Home Office said the Government had no intention of reviewing the drug's classification.
Lord Hague, who led the party from 1997 to 2001 and was foreign secretary under David Cameron from 2010 to 2014, called for the party to rethink policy, saying the war against the drug had been lost.
He wrote: "Everyone sitting in a Whitehall conference room needs to recognise that, out there, cannabis is ubiquitous, and issuing orders to the police to defeat its use is about as up-to-date and relevant as asking the Army to recover the Empire.
"This battle is effectively over."
Billy was discharged from hospital early on Monday afternoon, but now Ms Caldwell, 50, from Co Tyrone, wants an urgent review of the law on the substance, which is banned in the UK despite being available in many other countries.
Ms Caldwell credits cannabis oil with keeping the boy's seizures at bay, saying he was seizure-free for more than 300 days while using it, but THC is restricted in the UK.
She demanded a meeting with the Home Secretary and the Health Secretary "within 24 hours".
Speaking outside hospital, she said: "The fact that Billy has been discharged is testimony to the effectiveness of the treatment and underlines how vital it is that every child and every single family affected in our country should have immediate access to the very same medication."
Mr Hunt had earlier told BBC Radio 4's Today programme: "I don't think anyone who followed that story could sensibly say that we are getting the law on this kind of thing right.
"I think we all know that we need to find a different way."
Home Office minister Nick Hurd told the House of Commons that Chief Medical Officer Dame Sally Davies would take forward the establishment of the expert clinicians' panel to advise ministers on any individual applications to prescribe cannabis-based medications.
Shadow home secretary Diane Abbott said Labour supported the legal prescription of cannabis oil for medical purposes, saying: "Children have been put at risk and experienced extraordinary suffering because this Government drags its heels and refuses to grant cannabis oil licences."
But asked about the law Mrs May was more cautious, saying: "Do we need to look at these cases and consider what we've got in place? Yes.
"But what needs to drive us in all these cases has to be what clinicians are saying about these issues.
"There's a very good reason why we've got a set of rules around cannabis and other drugs, because of the impact that they have on people's lives, and we must never forget that."
A spokeswoman for the Home Office said: "There is strong scientific and medical evidence that cannabis is a harmful drug which can harm people's mental and physical health and can damage communities. The Government is clear - we must prevent drug use in our communities and help those dependent on drugs to recover, while ensuring our drugs laws are enforced.
"The Government has no intention of reviewing the classification of cannabis and it will remain a class B drug. Classification is completely separate to scheduling regulations.
"Any debate within government about the efficacy and therapeutic use of cannabis-based medicines emphatically does not extend to any review regarding the classification of cannabis and the penalties for the illicit possession, cultivation and trafficking of cannabis will remain the same."
Additional reporting by PA.