Within four years, the prison is expected to be moved from its present site to another location.
The building in which it is located, which dates back to the British Mandate, will be turned into a center for tourists interested in ancient Christianity and the nearby airfield will be expanded to allow for pilgrim flights.
The government is expected to fund most of the construction, which will cost millions of shekels.
The ancient church was discovered in the course of an archaeological dig at the prison last year.
The oldest known Christian prayer sites date back to the middle of the fourth century, but experts who have visited the Megiddo site believe it goes back to the start of that century.
The date is based on shards and coins found at the site, as well as three Greek inscriptions on the mosaic floor of the church.
The Antiquities Authority decribes the site not as a church but as a "prayer house" since it was apparently located inside a Roman officer's private home, according to one of the inscriptions. Christianity became a legal religion in the Roman empire in the year 313.
Other findings that are indicative of early Christian rites are the central symbol of the fish, found in the mosaic, (later changed to a cross) and the fact that in one of the inscriptions, Jesus is referred to as "the lord Christos," a term which later disappeared.
President Moshe Katsav showed pictures of the site to Pope Benedictus XVI who is expected to be invited to pray there when the site is opened.