The 19-year-old, a product of the Dale academy, is now contracted to the club until the summer of 2017.
Cannon signed his first professional contract last June and went on to make 19 appearances this season, the majority of which came in the second half of the campaign as Rochdale challenged for a play-off position in League One.
Cannon, who can play at full-back or in midfield, told the club’s official website: “The Gaffer (Keith Hill) is really good at bringing through young players and developing them, so I’m really pleased to have been offered a contract extension.
“I want to keep on improving and I want to continue playing games so I know I’ll have to keep on working hard. There’s no room for slacking because someone else will take your place.”