John, who made his Wales debut in a World Cup qualifier against Macedonia in October, has come through the youth system at the South Wales outfit and started the club's first Premier League game of the season at West Ham.
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"Declan has done extremely well and is thoroughly deserving of his new contract at Cardiff City," Mackay told the club's official website.
"In addition, we are delighted to have secured his talent on a long-term basis. He's a fine young man, disciplined and professional, who will continue working hard as part of our Premier League squad.
"I've no doubt that Declan is going to have a big future with us and for his country."
John will hope to be involved in the Cardiff squad that travels to face Stoke City on Wednesday.