One in eight prisoners developed a drug problem after being locked up in jail, inspectors said on Tuesday.
A poll of a quarter of all inmates at Durham Prison last year found 13% had developed a problem with drugs since being held in the category B local prison.
The critical inspection also found that up to a third (33.3%) of prisoners were failing random drugs tests, more than a third (36%) thought it was easy to get hold of drugs and almost one in five (18%) thought they would still have a problem after being released.
Nick Hardwick, the Chief Inspector of Prisons, warned not enough was being done to tackle the problem which was linked to bullying and self-harm.
"The most troubling problem facing the prison was the availability of drugs," he said, adding it was not being tackled with "sufficient vigour".
Hardwick said: "The availability of drugs was a significant cause of bullying in the prison. The supply reduction plan was out of date and there was a degree of complacency and a lack of rigour in tackling the problem."
He went on: "Efforts to reduce demand were also weak. The drug treatment service was poorly staffed and lacked leadership. Many qualified staff had left recently."
Inspectors also found "links between poor treatment and self-harm", with the report showing there were more than 250 incidents of self-harm in the nine months before the inspection in October last year.
The survey of 216 of the 928 prisoners (23%) at the North East jail last September found that, on average, one in five inmates (21.7%) tested positive during random drugs tests in the six months to August last year.
But this rose to 33.3% in both February and June, the figures showed.
The inspectors also expressed concern that only 53 of the 115 suspicion tests requested between July and September last year were carried out.
Hardwick added: "HMP Durham presents a mixed picture.
"It has improved and some of the developments and new services it has in progress, in resettlement and purposeful activity for instance, are very promising.
"However, there are some areas, such as combating the supply of drugs, making sure prisoners get to activities, addressing diversity issues and taking a whole prison approach to resettlement, that we did not detect were being addressed with sufficient vigour."
Juliet Lyon, director of the Prison Reform Trust, said: "Violence, self-harm, drug abuse, excessive overcrowding, men and teenage boys locked up in dirty, graffiti-strewn cells for up to 20 hours a day only to face homelessness, unemployment and debt on release - not when it was rebuilt in the 1880s but this is Durham Prison today."
She added that, while the report was "not all bleak", it showed that the prison was "another in a line of Victorian jails buckling under overuse of remand, recalls and short sentences".
A 2010 report by the think tank Policy Exchange found it was an "open secret" that prisons were "awash with drugs."