Never wear black stockings, Lynda Dearlove's grandmother used to warn her. "She used to say only two sorts of women wear them … nuns and prostitutes."

It makes Lynda laugh to tell the story: because today she's Sister Lynda, a nun who is dedicating her life to working with sex workers in one of London's most notorious red-light districts, King's Cross. And just like the convent, the "safe house" Lynda has set up is women-only. "Women operate differently, and it helps street prostitutes – just as it helps nuns – to have a space that they know will only have women in it," she says.

Women at the Well – the project's name comes from a gospel story in which Jesus meets a woman at a well who is living in an "irregular" relationship, and refuses to judge her for it – looks like just another anonymous hotel in one of the side roads near the railway station. But step inside its doors and you're cocooned in a place that positively oozes "care": there are bright, cheerful paintings on the walls, a cafe and a clothes store, a computer room and lots of shower rooms with body lotion and fluffy towels.

"The women who come here can have counselling, and help with finding accommodation, but we also offer massages and manicures and the chance to get your hair done," explains Lynda. "Most of these women have never had the chance of any pampering in their life; what we're doing is helping them see that they matter too, that they have permission to care about themselves.

"The thing most of them most want is simply a long, hot shower. At one level, we really are dealing with very basic needs."

Most of the women who come here, says Lynda, have had desperately disadvantaged lives. "Typically they're in their 30s through 50s, and they've been involved in prostitution since they were teenagers. Many have mental-health problems; the majority didn't finish school, and almost none of them grew up in stable families.

"I'm not saying there's only one sort of background for prostitution – you do see women who come from much more advantaged backgrounds, but that's far less usual. On the whole, the women we see here have chaotic lives and always have had chaotic lives. Most of them live in hostels. If they have children, the chances are they've been taken into care."

What Women at the Well aims to provide, says Lynda, is something most of its clients will have had no experience of in their lives – the sense of being part of a family. "That's what we're trying to do that's different from the other services the women might access," she says. "Ours is a very holistic service, and we aim to give the women a place where they feel genuinely valued, looked after and cared about."

Women at the Well opened its doors four years ago, but Lynda's intention at the outset was to keep it "under the radar". She has decided to become more vocal because of what she is seeing: particularly, a rise in client numbers, which she puts down partly to an increase in London prostitution ahead of the Olympics, partly to the axing of other services the women used to use.

"Camden Council claims King's Cross was 'cleaned up' ahead of the opening of the Channel tunnel rail link – but that's not the case," she says. "Prostitution is a lot less visible round here than it used to be, but it's definitely still here. Exactly where and how the women work I'd rather not say, because I might put them at risk – but it certainly is happening." The Olympics, she says, is fuelling a growth in numbers. "We know from other cities that have hosted big sporting events that they go hand-in-hand with more men looking to pay for sex, and there's plenty of anecdotal evidence that's happening here at the moment."

Currently, around 40 women visit Women at the Well each day; and more than 60 sat down to its Christmas lunch a fortnight ago. In the last two months of 2011 the centre had 154 individual users, 59 of whom hadn't visited it before. "We're seeing more and more clients," she explains, "and I worry about how we're going to meet their needs. We're struggling to find the £370,000 a year we need to meet the needs of our existing users, and we know there are more who'd like to access our services."

She's proud of what the centre can achieve – according to last year's annual report, 24 women with no home were safely housed, 22 women reduced their episodes of self-harm, and 35 were helped to reduce their drug use – but she worries that she'll be swamped with new users, women whose needs she won't be able to meet. "These aren't women for whom there's a quick or easy or cheap fix: their problems are very complex, and they need a great deal of help to bring about real change in their lives," she says.

As well as other services, women using the centre are offered sexual health advice. This is a treading-on-eggshells issue for a project run by a Catholic nun – but it's clear that Lynda operates as close to the wire as she possibly can without invoking the ire of the Catholic hierarchy. "We enable women to have contact with sexual health services because they're in a high-risk occupation," she says. "It's important to deal with it effectively, just as we aim to deal effectively with their mental and physical health."

She says she was "heartened by the Pope's recognition that within the context of prostitution, using a condom is primarily about the intention to reduce the risk of infection and an assumption of responsibility".

It was growing up in the north-east that encouraged Lynda, 50, to join the Sisters of Mercy 25 years ago: her vocation sprang, she says, from being part of a community where strong women were the norm, and from seeing that the Catholic church could be a force for justice and equality in an underprivileged community. "The church I saw was always on the side of the poor and disadvantaged, and that's what drew me in," she says. For some years she ran a shelter for homeless people: but gradually she realised there was one group of clients the shelter wasn't catering for. "Those women were street prostitutes, and they were the most disadvantaged group of all – and in a shelter that was dominated by men and their needs, the women simply weren't being heard," she says.

What angered her on these women's behalf was that as disadvantaged children they had been seen as "deserving" – whereas once they were effectively forced into prostitution, society ceased to care. "One minute they're 'children in need' and we're trying to help them, the next minute they've turned 18, we've failed to help, and suddenly it's all their own fault."

Women at the Well is funded from a variety of sources, including the Sisters of Mercy. "My fellow sisters were happy to back me – they believed, as I believe, that this is the work our order's founder, an 18th-century Irishwoman called Catherine McAuley, set us up to do," says Lynda. "She worked with women in extreme need, just as I do." Other funding comes from grants and individual donors, with around a fifth coming from central government – and this, says Lynda, means the centre is likely to be less vulnerable than many other services to the current cuts. The flipside, however, is that client numbers are likely to continue going up.

Over the last three years Sister Lynda has become increasingly respected among those who champion the rights of sex workers – in 2010 she was awarded the MBE, and last year she was nominated for an International Women of Courage award. On a personal level – as an articulate and knowledgeable champion of women's issues – she seems ideally suited to her role, but isn't there a bit of an irony that, as a Roman Catholic nun, she represents one of the most patriarchal institutions on earth? Fair point, she concedes.

"But what I say to people who talk about the way religious systems oppress women is: make sure you don't confuse faith and religion. They really are very different things."