Reid made the remarks before a joint session of the state's Legislature, with brothel members and prostitutes in attendance.
Reid says legalized prostitution is preventing businesses from relocating to Nevada.
"We should do everything we can to make sure the world hold Nevada in the same high regard you and I do," Reid said. "If we want to attract business to Nevada that puts people back to work, the time has come to outlaw prostitution."
One prostitute called Reid's remarks offensive, saying the senator should be proud of the way Nevada's brothels regulate the sex industry.
In his autobiography, Reid, a Mormon, wrote about growing up in the mining hamlet of Searchlight, Nev., and learning to swim in the pool at a bordello. His mother took in laundry from the 13 brothels around town.
The Associated Press contributed to this report.