The State is to hand over the historic Spike Island to Cork County Council to turn it into a tourist attraction.
The island, near Cobh, has been in the hands of the Department of Justice since 1985.
It was first used as a prison in the 17th century following the end of the Cromwellian wars when it held inmates to be transported to the West Indies.
During the 18th and 19th centuries it was used by the British to transport prisoners to the colonies. Up to 2,500 people were in the prison at the height of the Famine in the mid 19th century, with almost two-thirds jailed for stealing food.
Over time the prison population dropped to about 500 and it was passed into the hands of then taoiseach Eamon De Valera in 1938 when the last British troops left the island.
It was finally closed in January 2004.
Minister for Foreign Affairs Micheál Martin said the Government would fully co-operate with the county council.
“I believe that it is important to unlock any tourism potential of the island to the immediate benefit of the Cork and Munster region generally and I would like to thank all those involved in Cork County Council for their willingness to actively explore the tourism potential of the Island,” he said.
Cork County Council said talks had been going on for the last 12 months to secure the deal. County mayor Derry Canty said: “This is a significant milestone in the unlocking of the potential of Spike Island and Cork Harbour for the future.”