In an interview with The House magazine, the veteran Europhile said going back to "euro-wars" would keep the party out of office.
He said he thought it was "pretty zany" Europe was being debated again.
And it would be "irresponsible" for anyone to tactically campaign to leave the EU to further their leadership bid.
He said: "If we choose our next leader on the basis of the leader's views on Europe, then we're continuing the same insanity that's put us out of office throughout the 2000s."
Mr Clarke, a longstanding advocate of Britain's EU membership, urged party members to consider more important issues than "where you put them on this ridiculous scale on Europeanism".
"The reason we couldn't defeat Blair for so long was because the Conservative Party was making itself appear rather peculiar to the British public with this neurotic civil war it was having on an issue that wasn't regarded as very important by large numbers of the public."
Prime Minister David Cameron's announcement that he would not serve a third term as leader of the Conservatives has led to speculation over who will succeed him.
Home Secretary Theresa May, Chancellor George Osborne, and Mayor of London Boris Johnson, Business Secretary Sajid Javid and Education Secretary Nicky Morgan are among those considered to be in the running at this stage.
But Mr Clarke, who has made three failed bids to be Conservative leader, said he thought the next leader would probably be "some candidate that nobody had thought of until the last three or four weeks" before the contest begins.
He added: "I don't remember anybody who started campaigning for the leadership a year or two before the vacancy getting anywhere near it."
He criticised David Cameron's planned in/out referendum, due to be held by the end of 2017, saying referendums "never settled anything," citing Scotland's vote on independence earlier this year.
He said: "I never imagined that 50 years after I started in politics I'd still be engaged in the same arguments about Britain and Europe as I was when I started."
But Mr Clarke was hopeful that his party could avoid a split over the referendum, remarking "it's a corny old line, but some of my best friends are Eurosceptics. We don't fall out personally over these things."
Former chancellor Ken Clarke has warned Conservatives that choosing a leader based on their opinion of the EU could lead to civil war within the party.