A damning review of Victoria's adult corrections system has found prisons can be "devastatingly unsafe" for staff and people in custody.
And, the cultural review of the system, made public on Friday, found Indigenous people in custody are particularly at risk.
Prison staff and inmates are tolerating sexual harassment, racism and bullying which is compromising safety and must be addressed, the report found.
It said there was a strong ethical, legal and economic imperative for reform of the system, which includes about 6600 people in custody and 5000 staff at 16 locations.
"Despite progress to elevate rehabilitation and reducing recidivism as primary objectives, cultural change across the Victorian adult custodial corrections system remains incomplete," the report noted.
"There is a clear gap between the intention of policies and programs and their operational translation."
A suite of recommendations includes calls for greater investment to focus on rehabilitation, safety and human rights, along with greater attention to the specific needs of Indigenous inmates.
Corrections Minister Enver Erdogan said the report painted a stark picture.
"The recommendations propose the most significant and wide-ranging reform to the corrections system in decades," the minister said in a statement.
"They have policy, funding, legal, cultural and operational implications that must be thoroughly considered and carefully planned."
He said the government had already started work, including the appointment of more Aboriginal welfare officers.
"We want to avoid people coming into contact with the justice system in the first place – but for those who do, the system has a duty of care to look after them and help them get their lives back on track," the minister said.
Victorian Aboriginal Legal Service CEO Nerita Waight said the review highlighted why Victoria needed to reduce the number of people in prison.
"The current prison system is focused on punishment rather than rehabilitation and has a terrible lack of accountability," she said.
"The government needs to minimise the trauma prisons inflict on individuals, their families, and communities – but ultimately we need to end our reliance on prisons and invest in things that actually make prisons safer, like secure housing and employment, health and education services, and community supports."
Maggie Munn, acting executive officer with Change the Record, the campaign to reduce the over-representation of Indigenous people in custody, said prisons perpetuated trauma.
"It is really quite a damning finding but it's also the truth," she said.
"What we've seen in Victoria over the last couple of years with respect to the number of Aboriginal inmates and other people who have gone into custody and not made it out is really disturbing.
"Every prison system in this country has so much to answer for for the harm that they've caused Aboriginal people to shatter under."
Ms Munn said she welcomed the government's proposed changes.
"It's really hard as Aboriginal people to keep advocating reform for a system that just creates more trauma and harm," she said.