Justice Secretary Liz Truss is to establish special units within prisons to hold Islamist extremists most likely to radicalise other inmates.
She has also announced plans to strengthen the vetting of Muslim prison chaplains and remove extremist books from prison libraries.
It comes after a report found there was "complacency" at the "growing problem" of Islamist extremism in jails.
But opponents have warned it could make heroes of infamous Islamist inmates.
They also said it could lead to some of the most dangerous men being in a select few prisons units.
'Institutional Timidity'
The review into extremism in prisons, led by former prison governor Ian Acheson and to be published on Monday, said there was "institutional timidity" in challenging extremist views in prison, with staff fearful of being considered racist.
He also found radicals trying to get prison staff to leave during Friday prayers.
One of his key recommendations was to "incapacitate" violent extremists by keeping them away from other prisoners.
This should be done by creating special units in high security prisons, completely physically isolated from the rest of the jails, he recommended.
His report will only be published in summary for security reasons.
Mr. Acheson said his report had concluded that the National Offender Management Service, which is responsible for correctional services in England and Wales, "was very far from being effective in both understanding and reacting properly to the obvious threat posed by IE (Islamist extremism)".
In an email to the BBC, he said: "This must change in order to protect staff, prisoners and wider society and we have made dozens of recommendations to that end."
In response to Mr. Acheson's report, Ms. Truss is set to announce the most dramatic departure in decades in how the prison system in England and Wales handles terrorists and extremists, BBC home affairs correspondent Daniel Sandford said.
Books regarded as extremist will be banned from prison libraries, with five texts already having been identified.
And as well as strengthening the vetting system for prison chaplains, inmates behaving "subversively" will also be removed from Friday prayers.
'Extremist' books remained in prisons despite warning.
Warning over Islamic radicalisation in England's prisons.
'Correct the drift'
Mr. Acheson told the BBC: "Prisons must be places where there is order, control, stability and leadership.
"In the absence of these foundations it is all too easy for extremism to flourish and rehabilitation to founder.
"There are no easy answers to the problem of Islamist extremism or indeed any of the other ills which plague our prisons and stop them being hopeful purposeful places. But I am optimistic about the way Liz Truss has begun to deal with the issues and correct the drift."
Publication of the report comes a few days after it was revealed that radical cleric Anjem Choudary had been convicted of inviting others to support so-called Islamic State.
Fears have been voiced that Choudary, who is due to be sentenced in September, would be able to influence other inmates with his views.
But Daniel Sandford said that creating special units within prisons was not without risks.
When some IRA prisoners were concentrated in Whitemoor prison in the 1990s, they were viewed as having gained too much control in the high security unit and managed to escape, he said.
She has also announced plans to strengthen the vetting of Muslim prison chaplains and remove extremist books from prison libraries.
It comes after a report found there was "complacency" at the "growing problem" of Islamist extremism in jails.
But opponents have warned it could make heroes of infamous Islamist inmates.
They also said it could lead to some of the most dangerous men being in a select few prisons units.
'Institutional Timidity'
The review into extremism in prisons, led by former prison governor Ian Acheson and to be published on Monday, said there was "institutional timidity" in challenging extremist views in prison, with staff fearful of being considered racist.
He also found radicals trying to get prison staff to leave during Friday prayers.
One of his key recommendations was to "incapacitate" violent extremists by keeping them away from other prisoners.
This should be done by creating special units in high security prisons, completely physically isolated from the rest of the jails, he recommended.
His report will only be published in summary for security reasons.
Mr. Acheson said his report had concluded that the National Offender Management Service, which is responsible for correctional services in England and Wales, "was very far from being effective in both understanding and reacting properly to the obvious threat posed by IE (Islamist extremism)".
In an email to the BBC, he said: "This must change in order to protect staff, prisoners and wider society and we have made dozens of recommendations to that end."
In response to Mr. Acheson's report, Ms. Truss is set to announce the most dramatic departure in decades in how the prison system in England and Wales handles terrorists and extremists, BBC home affairs correspondent Daniel Sandford said.
Books regarded as extremist will be banned from prison libraries, with five texts already having been identified.
And as well as strengthening the vetting system for prison chaplains, inmates behaving "subversively" will also be removed from Friday prayers.
'Extremist' books remained in prisons despite warning.
Warning over Islamic radicalisation in England's prisons.
'Correct the drift'
Mr. Acheson told the BBC: "Prisons must be places where there is order, control, stability and leadership.
"In the absence of these foundations it is all too easy for extremism to flourish and rehabilitation to founder.
"There are no easy answers to the problem of Islamist extremism or indeed any of the other ills which plague our prisons and stop them being hopeful purposeful places. But I am optimistic about the way Liz Truss has begun to deal with the issues and correct the drift."
Publication of the report comes a few days after it was revealed that radical cleric Anjem Choudary had been convicted of inviting others to support so-called Islamic State.
Fears have been voiced that Choudary, who is due to be sentenced in September, would be able to influence other inmates with his views.
But Daniel Sandford said that creating special units within prisons was not without risks.
When some IRA prisoners were concentrated in Whitemoor prison in the 1990s, they were viewed as having gained too much control in the high security unit and managed to escape, he said.