The versatile 30-year-old Republic of Ireland defender arrived on Wearside last summer in what was a regarded a major coup but injuries and an uncertain start to the season by the club as a whole initially hampered the Irishman as he attempted to get to grips with life at the Stadium of Light.
However, in recent months, he has developed into one of the cornerstones of Sunderland's resurgence, and O'Neill said: "It has taken him a bit of time. We have got some really fine players here, but Manchester United have been winning for years and years and years, so it's good to see."
He added: "He is a great character around here and the players have got enormous respect for him."
O'Shea's central defensive partnership with Michael Turner in the absence of the injured Wes Brown and Titus Bramble has provided the firmest of foundations for Sunderland for much of O'Neill's reign to date.
Indeed, it was no coincidence that he was missing with a hamstring problem when the Black Cats headed for Blackburn on Tuesday evening and returned having lost 2-0, just their fifth defeat in 20 outings in all competitions since the former Celtic and Aston Villa boss took over from Steve Bruce.
O'Neill will hope O'Shea, who will be a key man for his country at the Euro 2012 finals this summer, is back in harness for Saturday's league clash with QPR on Wearside, and if not, Everton's trip to the north-east three days later for an FA Cup sixth-round replay.
Liverpool await the winners in a Wembley semi-final, and while few of the current crop of Sunderland players have much experience of that kind of game, O'Shea, who has a Champions League winners' medal, five league titles, two League Cups and an FA Cup win to his name, has.
O'Neill said: "Any person who arrives here with a winning mentality is very, very welcome, very welcome indeed."
Source: PA
Source: PA