Birmingham and Featherstone Prisons are to be run by G4S and Doncaster Prison by Serco, Justice Secretary Ken Clarke has told MPs.
In a Commons statement on 31 March 2011, Mr Clarke said that Her Majesty's Prison Service had been selected to run Buckley Hall Prison after the competition between public and private bidders that was launched in 2009.
Birmingham is the first existing public sector prison to be privatised. It holds 1,400 inmates and has 752 staff.
Doncaster prison will become the first to be run on a "payment by results" basis, with Serco only getting its full payment if if reconviction rates within a year of release are reduced by 5%, Mr Clarke added.
He also said the government had made "contingency planning" for the military to assist "if people are so unwise as to go in to industrial action" in response to the announcement.
Mr Clarke told MPs the competition process which led to the announcement began under Labour in 2009.
He argued that the move "will secure significant quality improvements and savings at all the establishments involved".
Shadow justice secretary Sadiq Khan welcomed the payment-by-results scheme but wanted to see the results of the pilot before it was rolled out across the country.
He asked whether there would be any redundancies as part of the plans and whether public sector terms and conditions for officers would be protected by the privatisation of prisons.