"There should be a separation between people who have been convicted of drug-related crimes and other types of crime," National AIDS commission head Nafsiah Mboi said.
About 27,000 of the 136,000 prisoners in Indonesia are drug users, she said.
Christian Kroll of the United Nations Office of Drug and Crime said overcrowding was another factor behind the high rates of HIV/AIDS in Indonesia's jails.
"The capacity is only for 70,000 inmates. The total number of inmates are 136,000," he said.
"The individuals who have been convicted of drug-related crimes should be treated as people who need therapy instead of criminals. Judges and prosecutors should be given further education while the number of treatment facilities should be increased," said Kroll.
The commission said the country had to invest in more drug rehabilitation centres.
Indonesia has the fastest-growing HIV/AIDS infection rate in Southeast Asia, according to the United Nations.