A jail housing foreign nationals has wrongly released inmates without proper preparation after assuming in error that they would be deported.
There was no proper resettlement strategy at HMP Bullwood Hall in Essex, according to Chief Inspector of Prisons, Anne Owers.
The prison had been for women but was changed to take foreign nationals.
Some of them also signed documents they did not fully understand because of a lack of professional interpreters.
The prison was rated "poor" on the resettlement aspect of its role.
The study said managers took the view that "no resettlement resources or strategy were needed, since all prisoners would face imminent deportation".
But the report said this was "not the case."
Many inmates were not deported because of their short sentences, lengthy previous residence and ties in the UK, or because they were European Union nationals.
An analysis of prisoners' needs only covered English speakers and was therefore "not representative" of the prison population.
Anxiety over their immigration status was found to be prevalent among prisoners.
The on-site immigration team was described as "unsettled, relatively inexperienced and poorly equipped".
Director of the Prison Reform Trust Juliet Lyon criticised the absence of national guidelines on the needs of foreign prisoners.
"The obsession with talking tough about foreign national prisoners has been at the expense of their welfare and public safety," she said.
The report, which was based on a survey of 78 inmates in November last year and an inspection the following month, found prisoners felt the prison was a safe environment and relationships between staff and prisoners were "particularly good".
A Prison Service spokesman said a review of resettlement at Bullwood Hall was underway and managers were working "in partnership with the International Organisation for Migration to put together resettlement plans for prisoners".