The Minister for Justice has made a commitment to replace padded cells with new safety observation cells as soon as possible.
The move will be announced at a conference on Saturday organised by the Irish Penal Reform Trust, which has lobbied against the inappropriate use of padded cells for mentally-ill prisoners.
In a recent letter to the trust from Mr McDowell to be read out at the weekend conference, he states that he regards the use of traditional padded cells as "unacceptable".
The letter continues: "I have therefore directed the director general of the prison service to replace as soon as possible all traditional padded cells with new safety observation cells which will fully meet the needs and respect the dignity of the prisoner in every way consistent with his or her safety.
"I will personally monitor the provision of the new safety observation cells." Mr McDowell also states that he recognises "the urgent need to tackle the underlying issue of delays in the provision of in-patient psychiatric care to mentally-ill prisoners".
The chairwoman of the Irish Penal Reform Trust, Dr Valerie Bresnihan, last night said she was very pleased with the Minister's "radical" move.
Many of the State's prisons contain several padded cells, and research by the Irish Penal Reform Trust, published last year, revealed that prisoners were often placed in them due to impulsive or chaotic behaviour, not because they were ruthless offenders.
The reasons recorded by prison officers for using the cells included "aggressive, unstable, depression, medical observation, certified insane and own request".
Prison governors said they believed the majority of prisoners who requested a padded cell were suffering from various forms of depression, and believed many of their mentally-ill inmates should not be in prison in the first place. "We have lobbied long and hard since this report and we are delighted with the Minister's response," Dr Bresnihan said.
"It leads logically to the creation of mental health courts, which would run like the Drug Courts, because it is factually correct to say that most mentally-ill patients who end up in padded cells are usually in prison because of minor public offence orders."
Saturday's conference on mental health in prisons, human rights and good practice will be addressed by the former UN Human Rights Commissioner, Mrs Mary Robinson.
It will also be addressed by Dr Harry Kennedy, a consultant in the Central Mental Hospital, and Dr Ian Keitch, a psychiatrist who runs a unit in Broadmoor prison.
The director general of the Irish Prisons Service, Mr Sean Aylward, will join a round-table discussion.