Young inmates at HMP Forest Bank in Salford are being tied up in their bed linen and beaten by other prisoners, a report has revealed.
The practice, known as "sheeting", came to light during an inspection by Nick Hardwick, HM Chief Inspector of Prisons.
Despite many victims reporting the abuse, staff branded it "horseplay" and managers were unaware of the problem.
The Ministry of Justice said safety issues were being "urgently addressed".
In his 100-page report on the category B prison, which houses 1,424 inmates, Mr Hardwick said he spoke to a "very vulnerable young man" who described being "tied up inside a duvet cover and 'battered' every night".
He said inspectors were "satisfied that this does occur and needs to be stopped".
It mainly happened in the A1 part of the prison, where half the jail's 110 young adults were housed.
However the privately-run prison, one of the largest jails in the UK, had shown many signs of improvement, inspectors said.
"Forest Bank is a good local prison and a number of improvements were evident since our last inspection," Mr Hardwick stated.
The standard of healthcare had drastically improved - three years ago a report by the then HM Chief Inspector of Prisons described it as "unacceptably poor".
Links with the local community, resettlement of prisoners and the number of training opportunities available have also been enhanced.
'Good local prison'
Despite this, there were real concerns over prisoner safety, which had also been highlighted in the 2007 report and had not improved.
"It is important to stress that for most prisoners, Forest Bank is a safe prison.
"But we were concerned that for a small minority of prisoners, it was not at all safe and in some cases prison officers on the wings had a passive attitude to bullying and unexplained injuries, however good the policies," Mr Hardwick said.
Forest Bank Prison, which is run by Kalyx Ltd, predominantly serves the Greater Manchester area and 75% of the prisoners come from within an 18-mile radius.
Michael Spurr, chief executive officer of the National Offender Management Service (NOMS), added: "I am pleased that the chief inspector records the improvement at Forest Bank, and that his overall assessment is that it is a good local prison.
"The issues about safety for some prisoners are however, a concern and they are now being urgently addressed by the director and his senior managers."