Matara and Galle prisons will be shifted to Pitabeddara in the Matara district.
The cabinet of ministers had approved a proposal by the prison reforms ministry to move prisons in Colombo, Matara, Tangalle and Galle.
The land released will be offered by a competitive bidding process for development and investment.
A large prisons complex in Borella in Colombo will be closed and the prisoners shifted to Mahara, Watareka and Kaluthara.
A prison in Tangalle in the South Coast will be shifted to Ranne where a prison will be built on a 65 acre land belonging to the Mahaweli River valley development agency.