Dorchester Prison staff are "battling against overwhelming odds in old and overcrowded premises", the pressure group the Prison Reform Trust claims.
The criticism comes after Chief Inspector of Prisons, Anne Owers said there were "too many prisoners and too little investment in buildings" there.
She added that the Dorset-based inmates needed more "purposeful" work in a report but said progress had been made.
The prison service said "considerable" progress had been made since 2005.
Ms Owers said: "This inspection shows two sides of Dorchester prison.
"First, it records the progress that has been made over the last two years.
"Second, it shows the limitations on that progress with too many prisoners and too little investment in buildings or purposeful activity.
"Dorchester's prisoners are now being held in a safer and better environment.
"But too few of them will have been able to access the activity and resettlement support they need to reduce their chances of reoffending."
Ms Owers' comments about HMP Dorchester comes after the prison was inspected in 2004 and again in April to see if changes had been made.
Inspectors also found that the treatment of those at risk of self harm or suicide had improved, but anti-bullying arrangements and the care of vulnerable prisoners "needed strengthening".
'Ladder of crime'
The report said there were also "no separate activity programme for young adults, who represented a tenth of the prison's population".
The inspectors also recorded that in spite of recommendations made at the last inspection, "urgently-needed capital expenditure for a new healthcare centre, visits hall, and gym shower facilities had not yet been made available".
However, the report noted there were some good resettlement initiatives, but more was needed for short-term prisoners.
Geoff Dobson, deputy director, Prison Reform Trust said: "Regrettably, the majority of prisoners spend most of their time locked in their cells, where the only people who will impact on their thoughts and behaviour are other offenders.
"For younger and short term prisoners this is particularly disastrous, with opportunities for resettlement and rehabilitation limited by the sheer pressure of numbers.
"Many prisoners with mental health and drug problems would be better dealt with outside the criminal justice system and petty offenders are more likely to step off the ladder of crime with properly resourced community penalties."
Phil Wheatley, director general of the Prison Service said: "I am pleased that considerable progress has been made at HMP Dorchester in the last two years and I would like to thank the Governor and staff for the efforts they have made to deliver real improvements to the way the prison runs.
"Since the inspection, more purposeful activity has been provided to help occupy the expanded numbers of prisoners."