It would be helpful to open Blender’s .blend file inside Unreal. And back and forth, when changing something in Blender, reopening would update new objects.
You could write support for it yourself and continue updating it every patch to UE4 or blender. Not easy, not fast but you’ll at least understand why there is no such feature currently. Meanwhile fbx format is way to go.
To open a .blend file, you need to use part of the Blender source. And it has incompatible license.
glTF is going to be the best option we get.
But unity has blender import nad epicgames already donated a large amount of money for blender development so maybe blender can make an exception.
Unity doesn’t import .blend files. When you try that it will just call blender to export the scene as fbx and import that.
Maybe just reading .blend files. For example, if you could drag and drop .blend file in Unreal, Unreal would read it as fbx scene, you would see your scene and all object in it.
If you would change something in Blender, refreshing inside Unreal would update it.
Did you try editor’s Auto Reimport?
You can point which Content directors should be monitored. Asset would be re-imported after saving a new version
You’d find these settings in Editor Preferences, Loading & Saving section.
Oh, thanks, I didn’t know that
That’s not quite right: Using Blender Source Code would make it easier, yes, but you can write your own importer/reverse engineer it (just as Blender itself did with FBX). The blend file format itself is not under GPL. See the FAQ: FAQ — blender.org
So if you write everything yourself to import the format, you should be safe from the GPL.Of course, that’s a lot of work.
Also wondering if it would be OK to write an UE plugin that’s under the GPL. Don’t know the rules for UE plugins. The GPL license is often misunderstood in my experience, it doesn’t mean everything it touches has to be GPL, too. AFAIK you can use non-GPL code in your code in combination with GPL-code as long as your code itself is GPL, too.But the 3rd party libs don’t have to be GPL. But I’m by no means an expert on the GPL license, so take what I say with a grain of salt.
Oh, yeah, It does. Viral license - Wikipedia
There’s LGPL tho. But it’s only allowed with dynamic linking.
Writing own parser of .blend format doesn’t worth it, at least for Epic. Why not to ask Blender Foundation to make a link plugin Blender > Ue4? (oh, they probably won’t bother either)
Ever heard of glTF format?
Well, glTF already in 4.19 so…
Even while FBX supported both by Blender and UE4 - people complaining. I don’t see how glTF would solve this issue.
You’re right, it’s more restricting than I thought. Linking to closed source libs is not possible, one has to use something like a message bus in between the open and closed source components.
Also I agree that it’s just not worth it for Epic: Not even the MAX file format is supported for import but only the intermediate export format FBX. So glTF is hopefully the future here. 
Why *.blend, a file format specifically for an application?
Instead, it should be a universal format, that should have liveupdates. Like FBX, or now glTF.
Maybe it does not matter to the people who are developping Unreal Engine to develop an effective importer-exporter.
Blender is Open Source, did you know ?
Why think in one direction only? Or maybe someone in the community will dedicate themselves to making an effective plugin.
I think the asset takes the Unity approach of wrapping Blender to export to an FBX but without the hassle.