Glen Parva prison is to be closed and replaced with a newly built category C adult prison.
The new jail will be one of five to be constructed around the country that have been announced by Justice Secretary Liz Truss today as part of a £1.3 billion scheme to upgrade ageing prisons across England and Wales.
The existing Glen Parva complex opened in 1974 and has until recently held just younger inmates.
It has been earmarked for closure by the end of next year.
Prison inspectors have judged parts of the former borstal to be in poor condition.
South Leicestershire Conservative MP Alberto Costa said he was advised of the project ahead of its announcement.
He said: “The Government has announced HMP Glen Parva is to be completely redeveloped with a new build prison on the site.
“My immediate thoughts are that I would wish to discuss this with all the relevant stakeholders in my constituency.”
It is so far unclear whether the new prison would be run by the private sector or the Prison Service but Mr Costa said he would seek to make sure existing staff were offered alternative employment as a priority.
He said he also wanted to ensure the families of inmates who may be moved would still be able to visit them.
He added: “I will be liaising closely with Liz Truss to ensure the views of the people of South Leicestershire are taken into account as will as prisons minister Sam Gyimah.”
It is understood the new prison could open before 2020 and that it will be built near the existing complex, which will be demolished.
It is unclear how many prisoners it will hold or how much it will cost to build.
Last year the Government ditched a controversial £85 million plan for a secure college at Glen Parva to house 320 youngsters aged 12 to 17.
The new prisons announced today were part of a package of measures outlined by Ms Truss which included the recruitment of some 2,500 more prison guards and “no fly zones” imposed over jails in a drive to tackle the “toxic cocktail” of drugs, drones and mobile phones behind bars.
Offenders will be tested for drugs on entry and exit from prison as part of sweeping reforms aimed at halting the rising tide of violence and substance abuse across the estate in England and Wales.
Dwindling staff numbers have previously been highlighted by campaign groups and unions.
The new surge, which includes an additional 400 personnel announced last month, will be focused on staffing categories which currently total around 18,000 officers.
Other measures to be explored include action to combat drones dropping drugs and other items into prison grounds.
Figures have revealed increasing numbers of incidents involving the use of remotely-controlled devices for smuggling contraband into jails.
All inmates will face mandatory drugs testing on arrival and departure from prison, while 300 sniffer dogs have been trained to detect psychoactive substances, which have been identified as a factor behind surging incidents of violence.
The Government is working with mobile phone operators to block illegal use of handsets by inmates.
The shake-up will also target re-offending rates, which see more than 100,000 crimes committed annually by ex-prisoners – costing society £15 billion a year.
Offenders’ levels in English and maths will be tested so their progress on the inside can be measured, with the results published in new prison league tables.
Plans to give governors more powers over education, work and health budgets will also be outlined.
If a jail is found to be failing by the Chief Inspector of Prisons, the Justice Secretary will have a new legal duty to intervene.