A prison officers' union says giving the contract to run the Auckland Central Remand Prison to British company Serco leaves the jobs of 350 staff up in the air.
Serco was one of three companies bidding for the $400 million contract and has operations worldwide, including the Asia-Pacific region and North America.
The company has a fixed contract for six years, with the option of a further four years.
The Department of Corrections says existing staff will have the first opportunity to seek employment with the company.
Corrections Association president Beven Hanlon expects Serco may cut staffing levels by about 30%.
Mr Hanlon says there will also be fewer staff to control the same number of inmates, which puts immense pressure on the prison in Mt Eden.
Serco chief executive David Campbell admits staff reductions are possible, but says there will be no wage reductions and everyone will be guaranteed a job application.
Corrections Minister Judith Collins says Serco will be required to work on rehabilitating inmates and after the third year of operation will be required to reduce recidivism rates.
Ms Collins said the company will be able to run the facility more cheaply than the Department of Corrections, through the use of technology as well as better staff rostering.
Auckland Central Remand Prison will be one of two private prisons in New Zealand. The other is a new men's prison in Wiri in South Auckland, which will be built as a public-private partnership.
Ms Collins says the company will bring new ideas and international best practice, which will benefit the sector.