Allowing prisoners access to computers and the internet would help with reintegration into society and reduce reoffending once they are released, according to research.
Secure, controlled use of the web can also transform education, family contact and resettlement in jails, the joint Prison Reform Trust and Prisoners Education Trust report said.
Through the Gateway: How Computers Can Transform Rehabilitation examines the use of information and communication technology (ICT) in prisons and its potential as a tool for rehabilitation.
It is based on a survey of jails sent to all prison governors and directors in England and Wales supported by the National Offender Management Service (NOMS).
Nearly three quarters (74%) of the prison governors and managers who responded to the survey agreed that prisoners should have secure and controlled access to the internet, while 94% agreed ICT skills were necessary for everyday living.
Three quarters (67%) said that prisoners should be able to set up bank accounts while in prison using ICT.
The report said greater and more effective use of ICT in prisons would improve opportunities for education, training, employment, resettlement and strengthen family ties - all factors which have been shown to reduce reoffending on release.
Nearly half (47%) of adults are reconvicted within one year of release. For those serving sentences of less than 12 months and young people aged 18-20 this increases to 58%. In 2011-12, just 27% of prisoners entered employment on release from prison.
The main barriers for prisons using ICT to improve rehabilitation were concerns about security, financial constraints, the lack of a co-ordinated strategy, licensing and insufficient central resources, researchers found.
In the foreword to the report, Nick Hardwick, HM Chief Inspector of Prisons, wrote: "We can't go on with prisons in a pre-internet dark age: inefficient, wasteful and leaving prisoners woefully unprepared for the real world they will face on release.
"I have not met one prison professional who does not think drastic change is needed."
He added: "Of course, there are security issues that need to be managed but the technology itself allows every key stroke to be monitored and access can be risk-assessed.
"Perhaps there are some who will say computers and the internet are luxuries prisoners should do without.
There was probably some grumbling when they first put telephones on the wings too and if we want prisons to rehabilitate those they hold, we have to give them the tools to do so."
Juliet Lyon, director of the Prison Reform Trust, said: "Controlled use of ICT is a sensible way to bring prisons and prisoners into the 21st century.
"Closing the digital divide between people in prison and the community is vital for effective rehabilitation and resettlement."
Rod Clark, chief executive, Prisoners Education Trust, said: "These days most people could not function without computers or the internet and if we can't work, find a job or study without the use of ICT, how can we expect people in prison to do so?
"Technology can provide us with many solutions to help rehabilitate people in a safe, secure way and if we do not explore them, then we risk sending more people back into society without the skills or the motivation to live a life free from crime."
A Prison Service spokesman said: "We recognise that by using IT, prisoners can learn skills that will help in their rehabilitation and reduce their risk of reoffending.
"The virtual campus already offers educational material across the prison estate and we continue to look at further ways of helping prisoners learn about IT.
"However, we have to balance the needs of offenders with the need for security and financial constraints."