The new deal ties the 20-year-old to the Championship club until the end of the 2015/16 season.
Rose, a product of Barnsley's Academy, has made 15 first-team appearances and scored two goals for the Tykes so far.
He told the club's official website: "I'm pleased and proud to extend my stay at the club I love. I'm determined to get a shirt in the starting eleven, as there's no better feeling than pulling on that red shirt and sticking the ball in the net.
"The hard work continues and I'm just looking to improve myself as a player and person over the next two-and-a-half years and beyond."
Manager Danny Wilson added: "Danny is one of a number of younger players the Club feel have very good potential.
"The games I've watched him in over recent weeks, he's been very impressive."