Escape equipment, stolen credit cards, passports, forged driving licences, drugs and large quantities of cash were found during a crackdown on a "model" prison.
More than 100 police officers were involved in the operation at Blantyre House resettlement prison for serious offenders near Goudhurst, Kent, after the director general of the Prison Service, Martin Narey, received intelligence that serious crimes were being planned behind its walls.
Five prisoners were transferred to other jails and the governor, Eoin McLellan-Murray, was removed from his post because of the intelligence gathered and the 5 May raid, the Commons Home Affairs Select Committee was told.
All 120 inmates underwent mandatory drugs tests during the five-hour operation, which led to two ambiguous results - one in which a prisoner refused to give a urine sample and one in which the sample had been diluted.
Blantyre House had been widely praised for achieving the lowest rates of drug abuse, assaults on staff and reoffending after release.
But Mr Narey told the committee he believed Mr McLellan-Murray had allowed the balance to slip between progressive methods, such as temporary release for work placements and permission to build up savings in bank accounts, and the need for security.