'Racially fuelled' riot in Goulburn jail

Authorities have reportedly been forced to send in riot officers with tear gas to break up a racially fuelled riot among maximum security inmates in Goulburn Jail.

News Corp Australia's Daily Telegraph says inmates armed with homemade weapons and shouting the Islamic phrase Allah Akbar or "God is greater" threatened guards and smashed through an internal fence, sending the jail into lockdown.

The paper says the disturbance was the biggest at the prison in 10 years.

A source says the violence started in the maximum wing of the Goulburn facility about 3pm on Saturday when a number of ringleaders refused to line up for afternoon muster.

The unrest began as a result of certain privileges being denied to a handful of inmates, but the situation turned into a riot along religious lines.

The report follows Corrective Services officials denying News Corp reports convicted terrorists in Goulburn's Supermax lock-up have been using coded messages to continue jihadist activities.

A spokesman said on Sunday the department "strongly rejects" claims security gaps had allowed Australia's most dangerous inmates to plot acts of terrorism from the inside.