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Chile will invest 242bn pesos (US$420mn) to build four new prisons with a combined capacity of 6,300 inmates.
The government-built facilities are intended to reduce country-wide prison overcrowding, local daily El Mercurio reported.
Two of the prisons will be built in the northern cities of Calama and Copiapó, with investments of 32.3bn pesos and 69.8bn pesos, respectively.
Construction will begin on the Copiapó facility in 2016, with the start of operations set for 2019.
Another facility will be located in the central city of Talca and will require an investment of 70bn pesos. Construction will begin in 2016, with operations to start in 2018, the report said.
The fourth facility will cost 70.1bn pesos and will be built in either Chillán or Los Angeles in central-southern Chile, as local governments have yet to agree on a location.