Sir David Ramsbotham "apologised unreservedly" for speaking on matters that were beyond his remit, after being summoned to Mr Straw's seventh-floor office in the Home Office yesterday.
The Home Office issued a statement saying that Sir David had given "an undertaking that in future he will confine himself to commenting on matters which fall within his duties as set out in statute, namely the inspection of prisons and reporting to the Home Secretary on conditions in them and the treatment of prisoners".
The public humbling of the chief inspector will inevitably fuel speculation that his position will not be renewed when he reaches the end of his five- year term next year.
Mr Straw demanded an explanation from Sir David after the publication of an interview in the New Statesman last week, in which he called for the release of Jon Venables and Robert Thompson - who killed James, two, in 1993 - as soon as possible after they turn 18 next August. Sir David voiced concern at the prospect of the pair being released into the prison system and praised Thompson as "someone of some talent".
Sir David's comments received support from prison governors but angered James Bulger's relatives and prompted calls for his resignation. Mr Straw was said to be furious, particularly as the Government's treatment of the boys is shortly to be considered by the European Court of Human Rights.
Yesterday's statement said: "The chief inspector apologised unreservedly for speaking publicly on matters outside his responsibilities and, specifically, in relation to cases in which the Home Secretary acts in a quasi-judicial role."
The 20-minute meeting was the low point in the former general's role as chief inspector. He has angered prison management and staff with a series of critical inspection reports but has won admiration from reformers for highlighting the plight of young offenders, female inmates and mentally disordered prisoners. Signs that ministers were less than happy with his performance emerged in July when George Howarth, then a Home Office minister, told the Commons select committee that Sir David's comments were often based on "intuition" rather than facts.
Speaking before yesterday's meeting, the Home Office minister Paul Boateng told The Independent: "They are an inspectorate which works to ministers... An inspectorate is not some sort of free-standing agent working in a way that does not have any relationship to the over-arching objectives of the good government of the prison service."
Mr Boateng said there was no guarantee Sir David would be granted a request for an extra pounds 400,000 for more prison inspectors. He said: "We are looking very carefully at the role of the inspectorate and awaiting a business plan from the chief inspector. When we have that we will consider how best to proceed but we have to ensure that every penny of public money spent is well spent."