The Los Zetas drug cartel has the run of the prison in Saltillo, 190 miles southwest of Laredo, Texas, in what is known as "autogobierno" or self-rule, USA Today reported Thursday.
It dates back decades and forms of it exist in correctional facilities the world over, the newspaper said.
A report from the National Human Rights Commission shows self-rule on the rise, being practiced in 37 percent of Mexican prisons, up from 30 percent in 2009.
The report defines self-rule as inmates being permitted to manage internal functions "such as controlling keys, organizing activities (and) cleaning and overseeing dormitories, among others."
Security experts say self-rule exists mostly in state-level facilities and grew out of decades of corruption, neglect and underfunding.
"It's an expression of the enormous corruption that there is in these kinds of public security fields," said Vicente Sanchez, a professor at the College of the Northern Border in Tijuana.
In Saltillo, self-rule is in the hands of the Los Zetas, one of the most powerful and violent of Mexico's drug cartels.
Mexico's war on the cartels has seen hundreds of members imprisoned, but once incarcerated cartel members often take over a prison and continue involvement in their drug operations, officials said.
Self-rule, "Means having total control over an inmate population," along with "the ability to communicate with the outside without restrictions," said David Ordaz of Mexico's National Criminal Science Institute.