Colback is currently considering his future with the club amid fears his first-team plans could be limited by the transfer deadline day arrival of former Liverpool full-back Andrea Dossena.
But Di Canio is determined to keep hold of Colback, who is likely to keep his place against Arsenal at the Stadium of Light on Saturday with Dossena still a week away from achieving match fitness.
Di Canio said: "Jack is in negotiations but I hope he is going to sign a new contract because it would be difficult for him to find a better club than Sunderland.
"I know Jack wasn't happy in general at the end of last year and I had a chat and told him I don't want unhappy people here, but he has a big chance this year.
"In my opinion Jack is one of the best few left-backs in the country. He has all the characteristic qualities - he is aggressive, tough and intelligent and he can push forward.
"It depends on him but I'm very satisfied with the way he played in the last few games. He deserves a new contract and he can have a very good future here."
Di Canio is considering whether to end Wes Brown's 18-month absence from first-team action against the Gunners on Saturday.
Brown has continued to recover well from his long-standing knee injury and played a full part in training this week - but Di Canio admits he has doubts over whether the weekend is the right time for his return.
Di Canio said: "Wes is looking much better than he did last week and this is a good signal, so I am going to decide what to do with him.
"Wes is very close. It was important he had a good session with the rest of his team-mates and I will decide if he going to be involved in this game - which is a hard game - after so many months out."
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- Di Canio
- Andrea Dossena