The maximum security facility at Goulburn, south of Sydney, will be closed by the end of September and all 170 inmates moved to a different prison.
The wing has housed some of NSW's most dangerous inmates since 1884, but recent reviews have found the Victorian-era cells are no longer fit for purpose.
A report from the prison oversight authority in 2022 said many of the cells were nearly pitch-black when lights were off, poorly ventilated, susceptible to extreme temperatures and contained ligature points.
Their age had made them difficult to maintain and operate as a modern correctional facility, the corrections minister said on Friday.
"We are retiring these Victorian-era facilities and investing in modern, secure and fit-for-purpose correctional centres," Anoulack Chanthivong said.
"We are ensuring our staff have the safest possible workplaces and that those in custody are housed in facilities that meet contemporary standards."
The closure will not affect the minimum security or high-risk 'supermax' facilities in Goulburn.
Staff affected by the closure would be offered incentives to relocate, Mr Chanthivong said.
The prison workers' union would be involved in mitigating the impact on staff, he said.
Serial rapist Bilal Skaf is one inmate who has spent time in the maximum security wing set to be closed.
Skaf was found guilty of multiple counts of rape committed alongside his brother Mohammed in Sydney in the early 2000s.
Botched drug deal murderer Kevin Purtill and former Scottish baron Malcolm Potier, who twice attempted to hire a hitman to kill his partner, are among the other notorious criminals who have graced the centuries-old cells.
Silverwater Women's Correctional Centre will also be closed under the government's plan with inmates and services transferred to Dillwynia, near Windsor.
The reforms were necessary to protect prison workers and ensure conditions for inmates were safe and secure, Commissioner of Corrective Services NSW Gary McCahon said.
The closure of the sites is part of growing reform of the state's prison system, including bringing facilities at Junee and Parklea back into public ownership.
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