The street artist has promised to match the jail’s £10m asking price by selling the stencil he used to paint on the Grade II-listed building in March, a move campaigners hope will prevent it from being sold to housing developers.

Banksy’s contribution, together with Reading borough council’s, would bring the offer for the former jail to an estimated £12.6m.

The Bristol-based artist said Wilde was “the patron saint of smashing two contrasting ideas together to create magic,” adding: “Converting the place that destroyed him into a refuge for art feels so perfect we have to do it.”

Banksy’s mural depicted a figure, considered to be the writer, abseiling from the perimeter wall from bedsheets with a typewriter.

The stencil went on display at Bristol Museum and Art Gallery earlier this month as part of an exhibition by the artist Grayson Perry for his Channel 4 series Grayson’s Art Club.

The actors Dame Judi Dench, Sir Kenneth Branagh, Kate Winslet and Natalie Dormer are among the stars who have lent their support to the campaign to convert the jail into a cultural centre.

Wilde was held at the prison between 1895 to 1897 after being convicted of gross indecency when his affair with Lord Alfred Douglas was exposed.

While incarcerated, he wrote De Profundis, his letter to his former lover and, after his release, recounted his time there in The Ballad of Reading Gaol.

The prison was built on the site of the medieval Reading abbey, a monastery founded by Henry I – . Henry is believed to have been buried under the altar, now thought to be under the prison car park or walls.

Matt Rodda, Labour MP for Reading East, said the concept of using the prison to house arts had been proved by past exhibitions, adding that he planned to raise an urgent question in parliament this week to put ministers “on the spot” with the offer.

“There are these amazing layers of history – there’s the literary history and the LGBT community history, and the link to Oscar Wilde,” he said. “But there’s also some local and national Victorian social history and there’s the link to the royal family all in one building and it’s so well connected to the rest of country.

“For so many reasons it’s absolutely right this building is preserved and used in a constructive way rather that just being gutted and turned into flats or some other thing.”

Toby Davies, the artistic director for Rabble theatre in Reading, said it would be criminal for the Ministry of Justice to turn down the artist’s offer.

Davies told the BBC: “Banksy is offering an incredible amount of money, which will go directly to the MoJ for the public benefit. Banksy’s offer is phenomenal and if the MoJ turn that down then I consider that a criminal act.”

Jason Brock, the council’s leader, welcomed the attention Banksy’s interest in Reading prison had placed on the sale.

“The council has had only informal approaches from representatives of Banksy to date, but no detailed discussions,” said Brock. “Our bid remains firmly on the table and has widespread support – both from within the community here in Reading and from the wider arts, heritage and cultural community – all of whom recognise the prison’s huge historical and cultural value.”