"I can't speak highly enough of Joe, he is technically very gifted," boss Tony Mowbray told the club website.
"He has all the qualities to become a Premier League footballer. Hopefully, we can achieve that target together."
Mowbray added: "Having said all that, he is still only a boy of 20 and he will make some bad decisions at times, but I am sure he will keep improving.
"What he's got to do now is get his head down, work hard and keeping doing what he's been doing."
Give your reaction to Bennett's new contract
Rochdale-born Bennett is another of the clubs academy graduates alongside players such as Matthew Bates, Andrew Taylor and Seb Hines and has made 32 first-team appearances.
He was also a member of the England Under-19 squad that reached the semi-finals of the European Championships in France during 2010.
Source: BBC Sport
Source: BBC Sport