More than 1,000 prison officers are believed to be involved in corruption, according to a leaked report into the Prison Service.
The damaging report, which is the result of a year-long investigation, concludes that while most staff operate in an honest way, a significant number of officers are involved in corrupt practices.
The report, which was leaked to the BBC, claims corruption ranges from bringing mobile phones and drugs into the jail to accepting cash payments from inmates for transfers to less secure prisons.
Mark Leech, editor of The Prisons Handbook, the annual guide to the penal system in England and Wales, said the report revealed the service was "institutionally corrupt".
But the Prison Service said the decline in levels of drug use and numbers of escapes suggested that the problem was being successfully tackled.
The report is the result of an inquiry by the Metropolitan Police and the Prison Service's anti-corruption unit.
It states that corruption often starts with "inappropriate relationships" between prisoners and staff and there are 600 such relationships.
One of the most damaging claims contained in the report is that when intelligence is received about corrupt officers, often no action is taken.
Mr Leech said: "This report reveals that what was claimed to be a few isolated cases of corruption is in fact the tip of a huge iceberg of dishonest practices that has infected the Prison Service nationwide.
"In short, it stands accused of being institutionally corrupt right across the country."
Brian Caton, general secretary of the Prison Officers' Association, blamed the problem in part on poor pay and an inadequate recruitment process.
He said: "The Prison Service seem to understand that there is this amount of corrupt prison officers and are prepared to do not much about it.
I find that absolutely irresponsible and unforgivable.
"There will always be a problem as long as prison officers are as poorly paid as they are and as long as the vetting and recruitment process are not fit for purpose."
Juliet Lyon, director of the Prison Reform Trust, said a handful of corrupt officers could undermine the work of the responsible majority.