The deal keeps him with the Bluebirds until the end of the season, with an option for next season as well.
Dixon joined Barrow after he was released by Sunderland in June 2015 and made his debut on the opening day of the season in the 2-1 home win over Dover Athletic.
He was called up for the England C training squad in September 2015 and has recently returned to first-team action following an injury he picked up in the home game with Guiseley AFC in November 2016.
(Photo: Joel Dixon signing his new deal with managing director Andrew Casson)