Its pounds 79m bid for the five-year contract beat six private sector tenders in the Home Office's first market-testing of an existing prison.
Derek Lewis, the director-general of the Prison Service, said the in-house bid was not the lowest but an independent panel considered it the most likely to deliver the terms of the contract while offering the best value for money.
Mr Lewis denied there had been any political intervention in awarding the contract.
Strangeways, which will re-open in September, will hold a maximum of 1,150 prisoners compared to more than 1,600 at the time of the riot.
The formal inquiry into the riot concluded that it had been sparked by intolerable conditions and overcrowding.Reuse content