The move will result in the removal of 2,600 "old and uneconomic" places and is aimed at saving £63 million in running costs.
Justice Secretary Chris Grayling announced that 200 places at private prisons used to deal with the post-riots bulge will also be taken out of use.
He also announced plans to build new house-blocks within the grounds of four existing prisons to provide an additional 1,260 "modern and cost-effective" places.
A new 'super' prison has also been proposed, which would be 25 percent bigger than Britain's current largest prison. It will be built either in London, north-west England or north Wales.
A feasibility study into its construction is to begin soon.
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