The Corrections Department has launched an investigation after a knife was found in the cell of one of the country's most dangerous criminals.

A homemade pocketknife has been discovered hidden in Graeme Burton's cell at Auckland's Paremoremo Prison.

Corrections Northern Regional Manager Warren Cummins has confirmed an employment investigation has been launched, following allegations guards had been failing to search Burton's cell on a daily basis.

Today's Herald on Sunday reports staff had been signing to say they had been doing searches of Burton's cell, when security footage tells another story. Less than two years ago, Burton attempted to murder another inmate in the same prison with a sharpened steel rod.