"It gives [inmates] a structured day, helps with behaviour and [means] you're not institutionalising them too much before they go back out into the community," said Mrs Tolley.
She said the plan would require significant infrastructure upgrades but all prisoners at the three jails were expected to be working fulltime by the end of this year.
The minister said one of inmates' biggest problems was boredom and many would relish the chance to work - a point that was backed by prison reformers.
Rethinking Crime and Punishment founder Kim Workman said the belief that prisoners were lazy by nature was a myth.
"Most prisoners would enjoy the opportunity to work a 40-hour week - their main complaint about prison is the level of enforced idleness."
Green Party corrections spokesman David Clendon said he supported the initiative in principle, but said Corrections would have to take care not to undermine the private sector. He said the work should be meaningful, skills-based work, and suggested inmates be paid for their labour.
"Often prisoners are released with little or no money which is not helpful in terms of finding accommodation. If a person hasn't got a home or a job, then the $350 they leave prison with is simply not enough."
Asked whether working prisons were a form of cheap labour, Mr Key said: "Not really. There already are work programmes which are ... sometimes controversial because they take work ... off the private sector. But the aim here is to build up that skill base.
Inmates who had severe addiction problems would not be required to work 40-hours a week, but would instead take part in fulltime rehabilitation or education.
Working prisons
Rolleston
Men only, minimum to low-medium security, 320 beds
Tongariro-Rangipo
Men only, minimum to low-medium security, 600 beds
Auckland Region Women's Corrections Facility
Minimum to maximum security women, 456 beds.
