In order to accomplish this, you first need to make sure that the page that you want to be your blog’s homepage is named home.php. This will be the page displayed at the root of your domain.

Next, you’ll want to create a new file named blog.php and place the following code within the file:

<?php
/*
Template Name: Blog
*/
// Which page of the blog are we on?
$paged = get_query_var('paged');
query_posts('cat=-0&paged='.$paged);
// make posts print only the first part with a link to rest of the post.
global $more;
$more = 0;
//load index to show blog
load_template(TEMPLATEPATH . '/index.php');
?>

That is all you need for code in that file. Upload it to your theme. This code creates a loop of your index.php file in your theme (commonly used as the single post page) and displays it as a typical blog homepage. Because this page will pull from your index.php file, going forward, any changes you make to your index.php file will update on this page as well.

Now, go into your dashboard and create a new page called Blog. Then select the Blog file you just created in the Page Template drop-down menu in the right sidebar.

Once that is done, the last thing you need to do is go over to your permalink structure page (under Manage) and add /blog/ to your custom permalink structure. This means if you are using an optimal permalink structure, you would want to use a custom structure of /blog/%postname%/. If you are doing this to an established blog, you can easily use the Permalink Redirect plugin to redirect your old permalink structure to the new one.

To see this in action, you can check out my personal blog, Kyle Eslick dot com. If you have any questions, feel free to post them below and I’ll do my best to answer them.

Edit: This was written for WordPress 2.1 through WordPress 2.3.3.   It appears that a slight adjustment has been made for WordPress 2.5+.   Readers have confirmed that you can find the information you for a WordPress 2.5+ install in this post.   If you are using WordPress 2.5 or newer, please keep this in mind if you try this.