Inspectors said the "innovative and radical" work with prisoners' children at HMP Parc, Bridgend, was "probably the best we have seen".
It opened a 60-bed family interventions unit in 2010.
The Prison Officers Association (POA) said more staff and resources would help continue the work.
Prison inspectors reported on two unannounced visits they made at G4S-run Parc prison late in 2015 and early this year.
They found its work with families encouraged prisoner involvement with the lives of their child.
The family interventions unit at the privately-run prison, one of the largest in Wales and England, provides a range of programmes and activities for inmates aimed at helping them to maintain and improve their family relationships.
The prison has also worked with Barnardo's Cymru for about 10 years with the aim of making a visit to the jail less challenging for the children of fathers inside.
Inspectors said: "A prison analysis suggested that 69% of prisoners at Parc received regular visits compared with an average of 48% across the rest of England and Wales."
HMP Parc, which is also a young offenders' institution, houses more than 1,600 prisoners.
BBC Radio Wales current affairs programme Eye on Wales was given access to one intervention - a nursery rhyme session for fathers with young children hosted by the prison's charity-sector partner.
The men on the Rhyme Time session are inside for a range of offences including violence and drugs.
One of them told the programme: "My daughter was born while I was here, so I haven't had the chance to get a bond with her apart from being on groups like this.
"Through all these visits, the bond has come. Looking to when you actually get out the gates, from me never seeing my daughter on the outside, ever, I know she already knows that I'm her father and someone special in her life."
The head of the prison's family interventions programme, Corin Morgan-Armstrong, said: "It's about reducing reoffending and it's about improving the future outcomes of these children, most of whom will have negative, pre-determined outcomes because of their parental situation."
Prisons Minister Mr Selous said: "It's important we remember that the families of prisoners have done nothing wrong; partners, wives and children in particular.
"The evidence is that if prisoners manage to maintain strong family relationships they commit less crime when they come out.
"Parc has led the way but we really need to embed this as best practice across all prisons in Wales and England."
Mark Fairhurst, of the POA, said: "We welcome any new ideas in to how we can rehabilitate offenders and improve everybody's life, but that comes at a cost and the cost is resource, investment and staff training. "
Eye on Wales is on BBC Radio Wales at 12:30 BST on Sunday, 12 June
Using family bonds to promote the rehabilitation of fathers in jail is an idea that should be run in all prisons, minister Andrew Selous has said.