The ACT government will spend $54 million to massively expand the territory's prison, building two new cell blocks within two years to solve the overcrowding crisis.
The project will add 110 beds, giving the Alexander Maconochie Centre a total of 476 beds by mid-2016, with surge capacity of an extra 32 beds.
The prison's actual capacity will be significantly lower than the total number of beds, due to separation requirements.
The project is being undertaken as prison authorities grapple with housing and segregating rapidly rising numbers of inmates.
The head count again pushed dangerously close to capacity last week, rising to 341 inmates.
A 30-cell specialist care facility, designed as a middle ground between the prison's crisis support unit and mainstream area, is expected to be completed by the middle of next year.
The government hopes that a larger 56-cell block will be finished by mid-2016.
Both blocks are designed to allow segregation of prisoners, a task challenging in the AMC, which holds the full range of detainee classifications, unlike many facilities interstate.
Officials hope the design will prevent violent confrontations between prisoners who are not meant to mix, an issue that had serious consequences for paedophile Ian Harold King, who lost an eye in an assault early last year.
The government has been under pressure to quickly deal with the overcrowding crisis at the prison following an unprecedented surge in prisoner numbers since January last year.
Fairfax Media revealed in October, when news of the overcrowding broke, that the ACT government had buried a set of projections, produced by John Walker Crimes Trends Analysis in 2001, which predicted the kinds of prisoner numbers the AMC is now struggling to house.
The government instead produced its own, much lower projections, which were used to justify the building of a smaller, cheaper prison.
The ACT government went back to consultant John Walker for another set of projections following the overcrowding issues, and received a report in February.
The government is basing the expansion to 476 beds on the consultant's mid-level predictions of population growth, which suggest 421 detainees by 2032, rather than higher growth projections of 471 by 2032, or the lowest predictions of 389.
Corrections Minister Shane Rattenbury said he was confident the government had got the balance between the cost and the scale of the expansion right.
"We're not going to build the biggest prison we could build, because there's a limit to the amount of money that's available, and we don't want to just create a massive prison to fill up," he said.
"So the decision is to go mid-range, and then also commit to a deliberate strategy of keeping people out of custody."
Mr Rattenbury conceded the two-year construction time frame would be tight, but said the buildings must be finished quickly.
"We are working in an incredibly focused way to deliver on those timetables," he said.
"We have to. We have no choice."
The construction project is expected to create between 120 and 180 jobs and a local company will be used for both design and construction.
The two cell blocks will be constructed near the northern perimeter fence of the AMC, and extra security measures will be needed while the work occurs.
The blocks will be inside the current AMC boundaries.
At the same time, the ACT will work on a "justice reform strategy" designed to keep people out of custody.
Recidivism rates in the territory have continued to be a problem in recent years, despite concerted efforts.
But Mr Rattenbury said a range of new preventive approaches would be considered. As well, the newly established Throughcare Program appeared to be achieving success in breaking the cycle of reoffending.
Prisoner numbers are notoriously difficult to predict, and annual reviews of John Walker's estimates will be conducted to check how the numbers are tracking.
Major evaluations will be conducted every four to five years.
That is designed to allow the government to respond to higher-than-expected numbers to ease any overcrowding pressures in the future.
A development application is expected to be lodged for the project on Tuesday.