Chief Ombudsman Beverley Wakem has raised concerns about large numbers of inmates with mental illnesses going untreated.
Ms Wakem said that poses significant safety issues for staff, other prisoners and the mentally ill person themselves.
She said the situation would worsen as inmate numbers increase.
The prison officers' union, CANZ has warned the plight of mentally ill inmates will worsen if the Government introduces tougher sentences, before it builds a new prison.
The Government's proposed new sentencing regime will mean longer prison terms for many serious offenders, as well as tighter bail and home detention rules.
The result is expected to increase the number of prisoners, which could see them forced to share cells or face longer lock-downs.
The union's president Beven Hanlon said prisons are already dangerous for the mentally ill and the situation will worsen as prisoner numbers increase.
A spokesperson for Corrections Minister Judith Collins said she is reviewing her options with department officials.