Prisoners released early to ease overcrowding in jails will get up to ?172 compensation for loss of bed and board, the government said.
Some 25,500 inmates are expected to be released up to 18 days early and will receive payments totalling ?4.5m.
The payments, around ?10 a day, are to cover living costs during the time they would have been in jail because, as prisoners, they cannot claim benefits.
The Tories said the prison policy was "descending into Monopoly-style farce".
Shadow Home Secretary David Davis said: "First it resembled 'get out of jail free', now it is a case of 'get out of jail and receive ?200'."
Critics also argue the payments to inmates could be used to buy alcohol or drugs.
The prison population in England and Wales broke the 81,000 mark last week.
Tony Blair has said he regretted releasing prisoners early but it was "necessary". He said it was a "very temporary" move as more prison spaces are built.
Prison governors have been instructed to ensure they have enough money available when the first inmates are released, beginning on 29 June.
The Ministry of Justice said prisoners were coached in how to spend wisely by their resettlement programmes.
A spokeswoman said all prisoners would be paid the nominal discharge grant of ?46 and a "subsistence payment" in place of benefits which they were not eligible for until their formal release date.
"An allowance will also be paid to meet housing costs where applicable - these payments will be made direct to housing providers, subject to receipt of written confirmation from the landlord and will not exceed the amount that would be paid as housing benefit," she said.
The early release measures, announced earlier this week by Justice Secretary Lord Falconer, apply to prisoners serving jail terms of up to four years.
The government said that convicts would still be on licence under the new guidance, and serious sexual or violent offenders would not be included.
It would not include foreign nationals who would be subject to deportation at the end of their sentence or those who had previously broken the terms of their temporary release.
Lord Falconer also announced the creation of 1,500 more prison places in addition to 8,000 already planned.