The payouts include so-called "frivolous" suits that are settled because they would be more expensive to take to trial, the Post said Monday in an exclusive report.
Prisoners often share the names of lawyers who win prisoners' suits against the city, going so far as to write the attorneys' contact information near jail payphones.
"Once the lawsuit is created, even if it's nonsense, they still get paid -- and most of them are nonsense," a source at the jail told the Post.
Data from New York City agencies show the department of corrections was sued nearly 8,000 times from 2007 to 2011.
The city's legal department didn't know how many suits had been filed by inmates, but said "frivolous" lawsuits waste city taxpayer dollars.
"They unfortunately require us to deploy valuable public resources to investigate and defend the city," a spokeswoman said.
A suit alleging 100,000 prisoners were illegally strip-searched was settled for $35 million in 2011.