Transgender prisoners will be held in their own unit for the first time in the UK, without access to other inmates.
A wing of a female prison in Surrey will be separated off to house three inmates who have transitioned to being women and hold gender recognition certificates.
The three transgender prisoners at HMP Downview will not have access to other offenders in the jail.
A Ministry of Justice spokesman said: "Prisoner safety is our biggest concern and any decisions we take will seek to best manage the risks posed by each offender.
"The wider management of transgender offenders is a highly sensitive issue which poses unique and complex challenges and we are determined to get it right.
"That's why we are reviewing the way we manage all transgender offenders - this work is ongoing and no final decision has been made."
In normal circumstances policy is for transgender prisoners to be located according to their legally-recognised gender unless there are exceptional circumstances.
The Downview unit is not thought to be part of a wider policy for managing transgender prisoners and is instead intended to deal with the specific risks posed by the three inmates who will be housed in the wing.