Over 10,000 payouts have been made since 2013 for items including a dressing gown, hair clippers and trainers.
A Freedom of Information request from the Press Association showed more than £850,000 was awarded in the last four years.
The TaxPayers' Alliance says the numbers "paint a terrible picture", while the Ministry of Justice (MoJ) said it robustly defends claims and is successful in two thirds of cases brought by inmates.
The data shows 10,357 compensation payments were issued to inmates held at state prisons in England and Wales for lost and damaged property from 2013-14 to 2016-17.
Six-figure sums were awarded in each of the four financial years, adding up to a total of £855,541.02.
In 2014-15, payouts exceeded £300,000.
Some recent cases of compensation being awarded for lost property include:
A CD (£5.95)
A DVD player (£60)
An e-cigarette (£50)
Hair clippers (£16)
A rechargeable toothbrush (£19.99)
A watch (£30)
A duvet and duvet cover (£27)
Toiletries (£4.09)
A dressing gown (£20)
Trainers (£35)
Rules allow for inmates to lodge complaints and claims for compensation when property is lost or damaged.
More than a quarter (29%) of complaints investigated by the Prisons and Probation Ombudsman in 2016-17 related to lost or damaged property.
In July, the watchdog warned that prisons are "using scarce resources paying compensation for lost and damaged property".
Nigel Newcomen's final annual report as ombudsman said it was time for the prison service to "get a grip on the way prisoners' property is managed".
The report added: "The method of recording property needs to be brought into the 21st century; staff need time to follow the proper procedures; and prisoners' property needs to travel with them when they transfer between establishments (instead of following on weeks or months later)."
The total amounts paid out are: £199,086.98 in 2016-17; £190,191.71 in 2015-16; £313,347.70 in 2014-15; and £152,914.63 in 2013-14.