Home Secretary Jacqui Smith said a company which lost the personal details of thousands of criminals had broken rules for handling sensitive data.
The names, addresses and expected release dates of all 84,000 prisoners in England and Wales were on a computer memory stick lost by Home Office external contractor PA Consulting.
It also contains the names, addresses and dates of birth of 30,000 people with six or more convictions in the last year, as well as the names and dates of birth of 10,000 offenders regarded as prolific and the initials of people on drug treatment programmes.
Ms Smith said the loss was "completely unsatisfactory", adding the information should not have been downloaded on to a memory stick.
"This was data that was being held in a secure form, but was downloaded on to a memory stick by an external contractor," she told the BBC.
"It runs against the rules set down both for the holding of Government data and set down by the external contractor and certainly set down in the contract that we had with the external contractor."
The Home Office was told on Monday that the stick might be missing and on Tuesday PA Consulting confirmed to Ms Smith that it had vanished.
An internal investigation was launched but it took until Thursday before police were called in.
Officers from the Metropolitan Police's Specialist and Economic Crimes Unit were brought in to try and establish what happened to the stick.
PA Consulting had the information as part of research it was carrying out for the Home Office on tracking offenders through the criminal justice system. It is understood that its contracts with the Home Office will be examined in light of the data breach.
