I turned a silk vest into a rare, and then later found that I could not change it into a magic item, because it isn't normal.
Is there a way to turn a rare item into a magic item?
It was normal before I made it rare, so I think that if I had known before hand, I would have been able to make it magic, and then make it rare. I only started playing the game recently, so I have no idea of how things work.
The reason I was trying to turn it into a magic item is because when I used an orb of augmentation on it the message said "failed to apply item: target is not magic", I also tried to use an orb of alteration and it said the same thing.
Best Answer
While Samyam's answer is full of good information, it doesn't fully answer the question, which is "can I turn a Rare (yellow) item into a Magic (blue) item?".
The answer is yes, but it takes two steps:
This process will not change the item's quality, sockets, or links.