This paper analyzes the moral reasoning and perceptions of inmates in an eastern youth reformatory. A series of prison dilemmas, reflecting conflicts experienced by inmates and guards, was administered to 34 inmates; in addition, each inmate was given the standard Kohlberg moral maturity interview. Responses were scored for moral judgment and perception of moral atmosphere. Results indicate that the more primitive moral reasoning used in the prison dilemmas may be related to inmate perceptions of the moral atmosphere of the prison and that the traditional custodial prison fails to offer the inmate the conditions necessary to move him toward higher stages of thinking. The author feels that in order to substantially affect the inmates moral reasoning, communities must be provided that stimulate his moral thinking and are perceived by him as fair. Finally, the author describes an intervention to create such a correctional climate. (Author/SES)