Some Chinese-made products are being advertised with prisoners in mind although having a cellphone in jail is against British law, The Times reported.
The newspaper said it had spotted one of the devices advertised alongside a cartoon of a prisoner behind bars.
The devices, often marketed as the "world's smallest mobiles" and available from retail websites, including eBay and Amazon, often feature automaker logos such as BMW, Volkswagen, Bentley, Audi and Porsche.
A spokesman for Britain's Society of Motor Manufacturers and Traders told the BBC the society believed the devices were being made without its members' permission.
The cellphones are difficult to distinguish from a car key fob unless closely inspected, he said.
A prison service spokesman said efforts were under way to detect and confiscate the devices.
"A range of techniques -- including body orifice security scanners and high-sensitivity metal detectors -- has seen the [overall] number of recorded seizures increase," he said.
More than 7,000 phones and Sim cards were confiscated in prisons in England and Wales last year, officials said.
"The latest key fob mobile phone has the potential to increase the number of mobiles in prisons simply by the nature of the design and size," the Prison Officers Association said in a statement.