A damning report into a young offenders institute near Wolverhampton has found violence levels too high, inefficient security and drug usage among inmates three times above target.
Chief Inspector of Prisons Nick Hardwick said inspectors in November uncovered the worst overall findings since he took up his post in July 2010.
Prison bosses said a new governor had been appointed to address concerns.
Mr Hardwick said Brinsford, which is next to two prisons - Oakwood and Featherstone - and holds young men aged between 18 and 21, had deteriorated in almost all respects since its last inspection in 2012.
"This is an establishment that needs significant improvement," he said.
"When we spoke to staff and managers they were aware of the problems but seemed overwhelmed, and they lacked a plan or the determination to begin to get to grips with what needed doing."
The report said structures to tackle bullying "lacked rigour" and said there was insufficient work or activity for inmates.
It highlighted "squalid" and "dirty" cells "unfit for occupation", covered in graffiti with window panes missing.
Almost 12 per cent of inmates tested positive for cannabis, almost three times higher than the target of 4.5 per cent.
But it praised health services and said they were "probably the best feature of the institution".
Mr Hardwick said: "We found so much wrong with Brinsford that it is going to take time to improve, but stronger leadership and capability from managers, along with a better approach and greater professionalism from staff, would be a start.
"It was appropriate that a new governor was appointed shortly after the inspection. He has made a vigorous start on making the necessary improvements but it is still very early days."
National Offender Management Service chief executive Michael Spurr said Brinsford had a "challenging population" at the time of the inspection and was struggling to cope. He said performance had "deteriorated to an unacceptable level".
Chief Inspector of Prisons Nick Hardwick added: “Inspectors uncovered the worst overall findings since he took up his post in 2010
“Following the inspection we took immediate action to improve conditions.
“A new governor was appointed and urgent work was done to improve safety, ensure decency and increase activity.
“The prison is now clean, safe, ordered and is operating to an acceptable standard.
“There is more to do to ensure this rapid progress is maintained and embedded but the governor has a clear strategy in place and has the full support of his staff. I am confident that when inspectors return they will see a much improved establishment.”
However, Frances Crook, the chief executive of the Howard League for Penal Reform, said Brinsford should be immediately closed.
“The inspection of Brinsford prison reveals an unsafe, ineffective and violent institution that should be immediately closed," a statement said.
“Rather than locking up teenagers in squalid conditions, letting some out of their cells for just ten minutes a day, the government needs to start to reconsider its policy of wasting public funds and young people's lives behind bars.”