The jail system is in "serious crisis" with overcrowding affecting rehabilitation of offenders, the chief inspector of prisons has warned.
Ms Owers also warned about foreign prisoners being held too long
Anne Owers said some jails have become "riskier places to manage" because of the overcrowding problem.
Many male prisoners had mental health issues that would be better addressed in secure hospitals, Ms Owers said.
A Home Office spokesman said it shared her concerns on "a number of issues" and was "addressing the problems".
There are nearly 80,000 prisoners in England and Wales, with some inmates held in police stations and court cells to ease overcrowding.
Speaking at the launch of her report, Ms Owers said the crisis was such that prisons had become "like a funnel where liquid is being poured into the top with no tap to release it at the bottom".
She was particularly critical of the management of the growing number of prisoners serving indeterminate sentences - those with no set release date - saying she had warned of failures in previous years.
Failure to deal with their rehabilitation was a contributory factor in the current crisis, she added.
She warned there was no easy way out of the current overcrowding crisis.
And she questioned plans to erect new quick-build units on existing sites, saying they would be filled as fast as they were put up.
Long-term planning from the Home Office "should have happened some time ago", she added.
"It is normally considered good practice to build an ark before a flood not during it," she said.
Ms Owers said ministers had also failed to act on a number of her previous warnings.
These included the number of foreign national prisoners - currently about 1,300 - being held beyond their sentence while they await deportation.
Warnings that too many under-18s and women - about 3,000 and 4,000 respectively - had been imprisoned rather than given community sentences, has also been disregarded, she added.
In her report, Ms Owers praised the work done to achieve a reduction in self-inflicted deaths.
Paul Cavadino, chief executive of crime reduction charity Nacro, said the overcrowding crisis was a result of an "addiction to prison sentences".
He said indeterminate sentences were being used excessively and called for a law change to ensure they were only used when "genuinely necessary".
Director General of the Prison Service, Phil Wheatley said he welcomed the "balanced and forthright" report.
"Anne Owers recognises the current issues we are dealing with and acknowledges that despite those issues we continue to provide a safe and positive regime for the prisoners in our care.
"I share her concerns over foreign national and young adult prisoners and we are working to address the issues she raises about these and other areas of contention," he said.
A Home Office spokesman added the department had delivered 20,000 more prison places since 1997 with plans put in place last year for another 8,000.
"But projecting the prison population is not an exact science," he added.
"Independent sentencing guidelines laid down that tougher post-release supervision of offenders should be balanced by a 15% reduction in sentence length."
This had not materialised, the spokesman added.
Last week, Home Secretary John Reid came under fire over a letter he wrote to judges and magistrates, asking them to imprison only the most dangerous of offenders.
He denied encouraging softer sentences for criminals to ease prison overcrowding, saying he was merely re-stating existing guidelines.