The 20-year-old right-back's existing contract was due to come to an end this summer, but he has agreed an improved deal, which runs until 30 June 2020.
Since making his debut in August, Blues academy product Dacres-Cogley has now made 10 first-team appearances.
Six of those have been since Gianfranco Zola succeeded Gary Rowett as manager.
Following the departure of Jonathan Spector and Paul Caddis during the January transfer window, Dacres-Cogley is now challenging new signing Emilio Nsue for Blues' right-back berth.
Birmingham City defender Josh Dacres-Cogley has signed a new three-and-a-half-year contract with the mid-table Championship club.