Bosses at Holme House prison are investigating after inmates posted a picture of themselves on social media.
A photo showing three inmates at the Stockton jail eating Christmas dinner and toasting each other with cans of Coke was posted on Facebook.
But the trio, who are believed to be Albanian, could find themselves facing longer sentences, with stiff penalties for anyone using an authorised mobile behind bars.
It is a criminal offence to bring a mobile phone into prison, or transmit sounds or images from within a prison using a mobile phone, with a maximum penalty of two years in prison.
A Prison Service spokesperson said: "This behaviour is completely unacceptable and we are urgently working to get the content removed from social media.
"Those who break prison rules will face tough punishments, including extra time behind bars.
"We are taking decisive action to find and block mobile phones in prison, including a £2million investment to block mobile phone signals."