A full-scale review of prison education will be carried out by the Home Office and the Department for Education and Employment.
Links will be improved between the Prison Service and other agencies, including the Learning and Skills Councils, to ensure training which starts in prison is followed up after release.
Capacity in the prison education system will be increased so more inmates have access.
"People who leave prison without a job or accommodation are twice as likely to re-offend," said Paul Boatng, the prisons minister. "We want to double the proportion of people who go straight from prison into jobs to 20 per cent in three years.
"But it doesn't end there. They need to be helped to keep a job. Once they have been able to hold a job down for three months, then we reckon we've cracked it."
The initiative will draw on the Prison Service education and libraries budget which is planned to increase by 17 per cent in real terms by 2004, to pound;63 million.
"The partnership marks the start of a sustained programme of action to tackle this important issue," said education and employment minister Baroness Blackstone.