At least 1,000 prison staff are corrupt, and more than 500 are in "inappropriate relationships" with prisoners, according to a leaked study.
The study drew on the responses of unnamed prison governors
The report, by the Metropolitan police and Prison Service's anti-corruption unit, said officers were thought to be smuggling drugs and phones into jails.
While it found most staff were honest, some were also taking inmates' cash for transfers to less secure prisons.
The Prison Service said the report overstated the corruption issue.
It also relied on anecdotal evidence, it said.
However, senior figures within its own anti-corruption unit are quoted as saying the problem is growing and is not being tackled effectively.
But Phil Wheatley, director general of the Prison Service, told the BBC the allegations involved a small minority of staff, but it was important to deal with the issue.
He said: "There is a problem, there is always a problem about bent staff.
"I was warned about the dangers of staff being compromised on my very first day in the service in 1969.
"It's an ongoing problem with prisons, we need to be alert to it."
'Tip of iceberg'
Mark Leech, editor of the Prisons Handbook, the annual guide to the penal system in England and Wales, 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 that has infected the Prison Service nationwide.
"The report shows that what the Prison Service currently has in place to tackle corruption is woefully short of what is actually needed in order to root out those officials... who bring shame on the service has a whole."
The document suggests corrupt staff commit illegal acts for personal gain.
The report, which was begun last autumn and completed in spring this year, quotes a series of unnamed prison governors.
It is the most detailed report to emerge on corruption in prisons.
One prison governor said there were far too many mobile phones in jail for them all to have "come over the wall".
Brian Caton, general secretary of the Prison Officers' Association, said poor pay and inadequate selection procedures were partly to blame.
He told the BBC: "When prison officers earned a good deal more than they do now, albeit through overtime, the levels of corruption were less.
"But they were also less because people were interviewed appropriately, their background was checked.
"They were vetted more severely than potential police officers."
Corruption is thought to be particularly concentrated in local prisons.
More than 45,000 people work in prisons in England and Wales.
Juliet Lyon, director of the Prison Reform Trust, said corrupt officers undermined the service.
"Most prison staff do a good job in difficult circumstances following just eight weeks of basic training," she said.
"However, the presence of even a small number of corrupt officers undermines their efforts as well as public trust in a service with a duty to maintain safety and security."