Four prisoners have been charged with misconduct over a live video published to Facebook on Monday - and the Department of Corrections says they have confiscated the phone used to do it.
The video showed prisoners sparring with each other and listening to music, and has since been deleted.
Corrections confirmed to 1 NEWS that the incident took place inside a communal bathroom at Auckland Prison's west wing.
They admitted it was a blind spot for them, as security cameras are not allowed in bathrooms, but said they will be addressing it.
Chief custodial officer Neil Beales said the prison's emergency response team carried out a search on Monday afternoon after the video emerged, with some banned items located.
As of yesterday, "searches to locate the phone remain ongoing", but Corrections told 1 NEWS this morning that the phone had since been located.
"Prisoners will be held to account for the possession of contraband found during these ongoing searches," Mr Beales said.
The four charged with misconduct will have their charges heard by a hearing adjudicator or visiting justice.
If found guilty, they can lose privileges like access to hobbies, telephone calls, visits in excess of minimum entitlement, forfeiture of earnings or cell confinement.
"Each prisoners' involvement will be investigated and further charges and sanctions will be laid where appropriate," Mr Beales said.
"We carry out a significant amount of work to prevent the introduction of contraband into prisons.
"In recent weeks we've located two mobile phones in the prison, and prevented three phones from being brought in."
Possession of a cellphone inside a prison is banned and similar videos discovered by 1 NEWS in 2015 led to a full investigation into "fight clubs" taking place at Mount Eden Corrections Facility.