A prison near Bristol is "setting women up to fail" by not helping them find housing, the Chief Inspector of Prisons Peter Clarke says.
His HMP Eastwood Park report says about 170 women are released every month but almost half have no long-term home.
Inmates who had gone through this said re-offending would be "inevitable" if the same were to happen again.
The Prison Reform Trust said the finding was "shocking", increasing the likelihood of going back to prison.
In the months leading up to the inspection, which took place in May, a "worryingly high" 42% of women released were left either to live on the streets or live in temporary emergency accommodation.
Mr Clarke added that although the issue was "beyond the prison's control", more support was needed.
Half of inmates were more than 50 miles from home, because the prison's large catchment area includes much of Wales. Over a third never received any visits.
Dr Jenny Earle, from the Prison Reform Trust charity, said: "The cause of at least some of Eastwood Park prison's failings lie outside its walls in the lack of housing and mental health support for women in the community.
"It is shocking that inspectors found that more than two in five women were being released homeless - only increasing the likelihood that they will return back to custody."
The inspection report also raised the question of whether some cells should close altogether.
"Over a year on since the publication of the Government's Female Offender Strategy, this report suggests that progress in key areas remains disappointingly slow.
"Women are still too often being set up to fail."
Overall the prison was regarded as "safe, respectful and purposeful".