More than 2,000 fewer people were sent to prison last year compared to 2015, a drop of 12%.
The drop is partly down to a reduction in prison terms for those who fail to pay fines - that number is down by 50% so far this year.
Head of the Irish Prison Service Michael Donnellan also said: "If you compare the Census for 2016 to 2006, there's a 22% drop in males between the ages of 20 and 29. If age is a predictor of offending, that goes some way to understanding, maybe, some of the overall reducation," he said.
There has also been an increase of 5% in people being supervised in the comnmunity by the Probation Service.
Around six out of 10 people who engage with the Probation Service do not re-offend.
Conditions are also improving for the prison population who are 80% male and 20% female, the Prison Service's annual report which was published today, shows.
Meanwhile, Irish prisons have an effective policy for dealing with gang leaders, according to Michael Donnellan.
He made the remarks after the Prison Officers Association said gangs had too much influence inside prisons.
Michael Donnellan said they have "solid" plans in place for gang leaders.
“We have a strategy of separating people who are gang leaders," he said. "Our strategy is also to disperse people, we don’t at the moment put all our gang leaders in one area. Our policy is to keep people separated, break them up and break down the influence.”
Business owners are also being urged to consider hiring ex-convicts, as it dramatically reduces their chance of re-offending.
The Tánaiste and Minister for Justice Frances Fitzgerald welcomed the publication of the report and launched the Joint Probation Service and Irish Prison Service Strategy for Development of Social Enterprise in the Irish Criminal Justice Sector 2017 – 2019.
The Tánaiste said: "During 2016, the number of Community Service Orders issued by the Courts and facilitated by the Probation Service increased to over 2,000.
"I am pleased to note the increase in the use of Community Service, as an alternative to prison. The use of prison as a sanction of last resort is a core principle of penal reform, and I applaud the Probation Service in their success in providing appropriate alternatives to custody."
She also welcomed the 12% reduction in prison committals highlighted in the report, saying: "We must continue to ensure that violent offenders and other serious offenders serve appropriate prison sentences while at the same time switching away from prison sentences and towards less costly non-custodial options for non-violent and less serious offenders."
The fundamental theme of the joint Strategy is that people with education and training, who are in employment, are less likely to offend. The aim of the ‘social enterprise’ model is to prepare prisoners for the work environment while in prison and to facilitate them in gaining employment upon release.
Speaking at the launch of the Strategy the Tánaiste said: “This innovative body of work will no doubt provide essential services and supports to ex-offenders as they begin the process of rebuilding their lives and reintegrating into our communities.”