The 22-year-old goalkeeper is now tied to the Carrow Road outfit until 2015 and will spend next season on loan at League One outfit Preston after a successful stint last term
The 22-year-old failed to make a first-team appearance for the Canaries last season, before being sent on loan to League One outfit Preston North End in January.
Rudd will now return to Deepdale for the 2013-14 season, but spoke of his delight at committing his long-term future to Norwich.
"I've been at the club since I was eight years old so to get another contract extension is brilliant, I'm really pleased with it," Rudd told the club's official website.
"It means that I'm still around close to home and at a great club like Norwich.
"It went really well at Preston last year - I think we only lost two games when I was there and we were unbeaten at home. I really enjoyed it and that's one of the main reasons why I wanted to get the contract sorted and get back there again.
"Working here with Dave Watson is great given the stature of coach that he is, but you need to play football. As a young goalkeeper that's the most important thing. I'm really looking forward to the season starting."
Manager Chris Hughton hopes first first-team football will continue to benefit Rudd, stating the club have high hopes for the shot-stopper.
"Declan is one of our young talents so therefore for him to get the opportunity to play regular football for a season is a benefit to both him and us," Hughton said.
"He clearly made a good impression during his spell with Preston last season and we hope he can make a similar impact again."