A prison officer resigned from Feltham Young Offender Institution because of racial abuse a year before Zahid Mubarek was murdered.
The public inquiry into the 19-year-old's death was told that an officer, named as Kassim, was subjected to racism daily, mainly by black inmates.
Mubarek, who was Asian, was killed by his racist cellmate Robert Stewart, then also 19, at Feltham in March 2000.
Minutes from a race relations meeting read to the inquiry showed Kassim had left because "he considered Feltham was unable to prevent abusive language". Kassim suggested that the problem "appeared worse" at Feltham than elsewhere.
The minutes showed that, although staff acknowledged that racial abuse was a "serious problem", it had continued "for years".
Keith Greenslade, staff officer to the governor at Feltham, had told the meeting there were few sanctions that could be applied to offenders on remand.
Greenslade also admitted to the inquiry it was "possible" that officers could have put a racist in a cell with a black person, despite the general practice of separating ethnic groups.
The response was the strongest yet in regard to allegations that prison officers deliberately put white and black prisoners in the same cells as part of a Gladiator-style game.
Greenslade told the inquiry that a lack of staff training and "naivety" led to under-reporting of racial incidents at Feltham. He added that he did not believe racial tension between inmates was a significant problem.
Greenslade's statement was followed by evidence given by John Byrd, a Feltham governor at the time of the murder. Byrd told the inquiry there were 62 allegedly racist incidents in 2000, and described the atmosphere on Mubarek's unit as "volatile".
The inquiry also heard Stewart's statement, in which he admitted for the first time that racial prejudice had played a part in the killing.
He said: "Whenever you went into a cell at Feltham you'd see graffiti like swastikas, the initials KKK and things like 'kill all niggers...' the general perception in Feltham was that all whites were racist, and the black lads didn't like the whites."
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