At present, the department managed a record number of 8746 prisoners across 20 prisons, courts and police cells, and they were not "numbers we should be proud of", she said.
In order to reduce reoffending, the department was offering help, in the form of specialised units, to the two-thirds of prisoners who had drug and alcohol problems, she said.
Drug treatment units at present targeted those on longer sentences, but the Otago unit would offer condensed three-month programmes for prisoners serving shorter sentences. Many of them would be first-time offenders.
The programme, which will treat 180 prisoners from Otago and Southland each year, would help reduce reoffending and the adoption of "a lifetime of addiction and crime".
Care New Zealand clinical director Kevin Pearce said 13 offenders would graduate today and he was confident four of them would "never be back" inside prison.
The key to addressing offending was not just about treating the addiction itself, but identifying why prisoners had first turned to drugs and alcohol.
"It is not the drug; it is about the issue," he said.
A dysfunctional upbringing was a recurring theme for many prisoners with addiction issues, and many a "tough guy" had broken down as a result of recounting their experiences.
Mr Pearce, who had established programmes in other parts of the country, said the addictions affecting prisoners at Otago were no different from other areas. Dependence on alcohol, cannabis, methamphetamine and heroin were all factors.
Otago Corrections Facility manager Jack Harrison said previously prisoners with addiction issues had been sent to Christchurch for treatment, but the new facility would allow them to remain at the facility.
"It is a great step forward for us."
