The company, Serco, operates six adult prisons and two youth offender centres in the United Kingdom and Australia and 22 immigration detention facilities in Australia.
They include Sydney's Villawood detention centre, where last month 10 detainees sewed their lips shut after an asylum seeker committed suicide.
Department of Corrections finance, systems and infrastructure general manager John Bole said today it was Government policy to use the private sector to inject new ideas into the prison system.
"Serco's proposal provided the best value for money, as well as the opportunity to inject significant innovation into the wider prison system," he said.
"Department representatives also visited Serco operated prisons and were impressed with what they saw. Serco operates six adult prisons and two youth offender centres in the United Kingdom and Australia."
Mr Bole said the Auckland prison would still operate within the corrections framework, all prisoners would remain the responsibility of the chief executive of the Department of Corrections and would have the right to complain to them or the Office of the Ombudsmen.
"Serco will have to comply with all relevant New Zealand legislation and international obligations. A prison monitor will be employed by the department and based at the prison to monitor its day-to-day management."
The prison is one of two that will be run privately, the other being the new men's prison at Wiri, south Auckland.
It will take full responsibility for the Mt Eden site by August 1 next year.
