The trustees of Columbia University, New York, voted to divest holdings in private prison companies on behalf of its $9.2 billion endowment, university spokesman Robert Hornsby said.
The school will also refrain from making new investments in such companies.
The decision to divest follows a recommendation by the university's Advisory Committee on Socially Responsible Investing and analysis and deliberation by faculty, students and alumni.
Mr. Hornsby declined to disclose how much Columbia has invested in these companies.
"This action occurs within the larger, ongoing discussion of the issue of mass incarceration that concerns citizens from across the ideological spectrum," Columbia trustees said in a statement. "We are proud that many Columbia faculty and students will continue their scholarly examination and civic engagement of the underlying social issues that have led to and result from mass incarceration."
Columbia's endowment returned 17.5% on its investments for the fiscal year ended June 30, 2014, compared to an 11.5% return the year earlier.