Financial cuts are damaging the regime at a Buckinghamshire prison that deals with dangerous inmates, a report says.
HMP Grendon, near Aylesbury, takes long-term prisoners with anti-social personality disorders.
Cuts have reduced time for interaction with staff vital for rehabilitation, said chief inspector of prisons Dame Anne Owers in the report.
A prison spokesman said savings had not compromised essential work with inmates at Grendon.
Phil Wheatley, director general of the National Offender Management Service, said: "The National Offender Management Service is committed to making efficiency savings, however our objectives are to protect the public and to reduce reoffending and that essential work will not be compromised."
He added: "The therapeutic community at Grendon has an important role in reducing the risk posed by serious offenders, and the high quality of results achieved here is recognised."
However, the inspector's report said there was a lack of a national strategy for prisons like Grendon, which is the only one in the country run entirely on therapeutic principles.
Inspectors found prisoners' time out of cells had been reduced, limiting opportunities for activities.
It also cut down the informal interaction with staff that supported the therapeutic process.
Group therapy sessions had been cancelled, supervision reduced and there was backlogs of reports, the report said.
Further cuts had been proposed in a national programme which did not appear to take into account Grendon's unique role, it added.
The report claimed cumulative cuts threatened the viability of the entire therapeutic regime.
Inspectors said Grendon remained a fundamentally safe place but there was still no national strategy to guide appropriate referrals to the prison.
But their report said there was little bullying or self-harm, minimal drug use and staff-prisoner relationships were "outstandingly" good.