Colback, who can also operate at full-back, is considering his future with his current deal due to expire at the end of the season.
Di Canio believes the 23-year-old's best position is at the back and insists he can go on to have a stellar career on Wearside.
He 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 also admitted that Wes Brown is edging closer to a return after an 18-month absence with a knee injury.
"Wes is looking much better than he did last week and this is a good signal, so I am going to decide tomorrow what to do with him," he said.
"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."