Inmates began rampaging through the jail in Medan city on Sumatra island on Thursday, setting fires and hurling bottles at guards in anger over power cuts and water shortages at the prison.
The Tanjung Gusta jail was engulfed in towering flames, killing three inmates and two prison staff who were trapped in their office.
"We stepped up efforts by instructing all police forces across Sumatra island to carry out a massive hunt operation," Heru Prakoso, spokesman for the North Sumatra police said.
Security forces managed to regain control of the prison on Friday afternoon and had recaptured 81 of the 212 inmates who escaped, he said, adding that four convicted of terrorist offences were still on the loose.
"Security at all entry points bordering North Sumatra province has been intensified," he said, adding that the elite Detachment 88 counter-terrorism squad was also involved in the operation.
The escaped terror convicts had been involved in militant training for Mumbai-style attacks on high-profile Indonesians and in connection with a bank robbery to fund terror activities, police said earlier.
Some 1,000 police and soldiers were deployed to guard the facility.
President Susilo Bambang Yudhoyono on Saturday promised to ease overcrowding in prisons.
"We have allocated one trillion rupiah ($100 million) to improve capacity of overcrowded prisons, to avoid the prison incident in Medan from recurring," he told reporters.
"Prisoners have fundamental rights that we must fulfil, especially in this Ramadan month, when many prisoners are fasting," he said, criticising the blackout and water shortage at the jail.
A spokesman for the justice and human rights ministry, Goncang Raharjo, said earlier that most Indonesian prisons had problems with overcrowding.
In February last year, dozens of inmates at the overcrowded Kerobokan prison on the resort island of Bali rioted and set parts of the facility on fire, sending outnumbered guards running.
The riot ended days later when heavily armed police stormed the prison.
