When Arne Kvernvik Nilsen was a little boy he had an idea that one day he might grow up to be an entertainer. Instead he became the governor of Bastoy prison island, the first "human ecological prison" in the world. Under Nilsen's tenure, Bastoy, home to some of the most serious offenders in Norway, has received increasing global attention both for the humane conditions under which the prisoners live – in houses rather than cells in what resembles a cosy self-sustaining village, or what the sceptics have often described as a "holiday camp" – and for its remarkably low reoffending rate of just 16% compared with around 70% for prisons across the rest of Europe and the US. Last year alone, the island, not much bigger than a breakwater in the Oslo fjord, played host to visitors from 25 international media organisations, all keen to find out the secret of Nilsen's success.

This month, Nilsen steps down after five years in charge, but intends to continue influencing penal philosophy in an international context. Recently, he has been in Romania, where he helped establish therapeutic wings in three large prisons, advising the prison authorities as they establish their own human ecological prison along the lines of Bastoy on a small island in the Danube delta.

"I run this prison like a small society," he says as we sip tea in his cramped but tidy office. "I give respect to the prisoners who come here and they respond by respecting themselves, each other and this community." It is this core philosophy that Nilsen, 62, believes is responsible for the success of Bastoy.

On a previous visit to Bastoy, I spoke to a number of prisoners serving long terms for murder, rape and other violent offences, and was struck by the air of optimism and hope they had of living constructive, contributing lives once their sentences were served. Among guards I noticed a glaring lack of cynicism and a genuine sense of pride in their work.

"It is not just because Bastoy is a nice place, a pretty island to serve prison time, that people change," says Nilsen. "The staff here are very important. They are like social workers as well as prison guards. They believe in their work and know the difference they are making."

I almost tell Nilsen about the British prison officer who, miffed when the governor of a high-security prison in Cambridge gave the prisoners in his care a 36p cream egg one Easter, told the Sun newspaper: "We have to spend time away from our families to look after these vermin." In fairness to him, that officer was only reflecting what he probably regarded as public opinion towards prisoners in this country. When I asked the female guard who drove me from the ferry landing to Nilsen's office about public attitudes to prisons and prisoners in Norway, she said that 90% of the public have no interest, "so long as people come out better".

It is clear to anyone – when looking at the results of Nilsen's approach that by achieving its low reoffending rate – thereby reducing the number of future potential victims of released prisoners, Bastoy prison works. Prisoners can come here for the final part of their sentence if they show a commitment to live a crime-free life on release. Bastoy is also one of the cheapest prisons in Norway to run.

But how do you get the man in the street to accept that treating people who have committed terrible crimes with respect and consideration is in his and his family's best interests. How do you explain to victims that this way is best?

An inmate enjoys the sun outside the house he lives in at Bastoy island prison in Norway. Photograph: Fredrik Naumann

"I don't think I will ever be able to do that," says Nilsen. "If someone did very serious harm to one of my daughters or my family ... I would probably want to kill them. That's my reaction. But as a prison governor, or politician, we have to approach this in a different way. We have to respect people's need for revenge, but not use that as a foundation for how we run our prisons. Many people here have done something stupid – they will not do it again. But prisons are also full of people who have all sorts of problems. Should I be in charge of adding more problems to the prisoner on behalf of the state, making you an even worse threat to larger society because I have treated you badly while you are in my care? We know that prison harms people. I look at this place as a place of healing, not just of your social wounds but of the wounds inflicted on you by the state in your four or five years in eight square metres of high security."

Nilsen was brought up on a farm run by his uncle near Trondheim. His father was a fisherman who often spent the spring months away at sea while his mother ran the home and looked after him and his two older siblings. He skied the 5km to school in the dark in the winter and cycled in the summer, and remembers his childhood with fondness. "I grew up in a very loving home. I loved helping on the farm and, in the summer, helping my father on the boat. There was a lot of joy in our house."

When he was 17, he joined the Salvation Army, studying at officer training college – where he met his wife. A 16-year ministry followed, during which he spent a year in the UK working one day a week in Lewes prison. On his return to Oslo, he helped to establish and run an institution called Soldammen, geared specifically to helping young drug addicts. It was a wrench, he says, when, after deep thought, he decided the time had come for him to resign as an officer of the Salvation Army. He went on to work in a church mission establishing a centre to care for people with HIV, before going to Oslo University College to study governmental management. In his own time, he spent four years training as a Gestalt psychotherapist and later applied successfully for the position of chief probation officer in the south-east county, which was his opening into the correctional services.

"I like to have power to influence," he says. "For most of my working life I have held positions of leadership where I have had the power to influence people, I hope in a good way."

From probation, he went on to work in the ministry of justice where he spent 12 years in various positions, taking charge of designing the content of prison regimes, working for the inspectorate and going on missions abroad, advising the ministries of Latvia, Afghanistan, Azerbaijan, Russia and Georgia. In Tbilisi, the Georgian capital, he advised on reforms of the police, courts and prison system. It was there that he witnessed prison conditions where there was little room for humanity.

"I saw a cell of about 30 square metres holding more than 90 prisoners. They slept on bunk beds three high with just a hole in the concrete floor, covered with a blanket, for a toilet. They wore only underpants in the 40C heat. The smell was unimaginable. Some had been in there for two years or more ."

He then took a year off to practise psychotherapy full-time, working with the prisoners on Bastoy Island. "One of the most interesting challenges of my career," he says.

When the then governor decided he was going to step down, he suggested Nilsen apply for the post. "It felt like the right time and the right place to continue my work. In Norway, as in the UK and many other countries, we still think quite short-term, wanting to inflict revenge on criminals, wanting them to suffer for what they have done. But in most countries nearly all prisoners are going to be released. So what happens to them when they are in prison is very important."

He believes that politicians carry a huge responsibility for the number of people in prison around Europe and the commensurately high reoffending rates. "They should deal with this by rethinking how they address the public regarding what is most effective in reducing reoffending. Losing liberty is sufficient punishment – once in custody we should focus on reducing the risk that offenders pose to society after they leave prison. For victims, there will never be a prison that is tough, or hard, enough. But they need another type of help – support to deal with the experience, rather than the government simply punishing the offender in a way that the victim rarely understands and that does very little to help heal their wounds. Politicians should be strong enough to be honest about this issue."