Press Association Sport understands Short held talks with the former Wycombe, Norwich, Leicester, Celtic and Aston Villa boss on Thursday night, and will resume negotiations on Friday with a view to making a swift appointment. However, sources on Wearside have insisted a deal is yet to be struck.
The Black Cats turned to fans' favourite O'Neill as their number one candidate in the wake of Steve Bruce's departure on Wednesday evening.
Former chairman Niall Quinn is expected to visit the club's Academy of Light training ground on Friday to talk to the players and inform them of the latest developments.
In the meantime, Bruce's assistant Eric Black will prepare the team for Sunday's Barclays Premier League trip to Wolves as they attempt to drag themselves away from the lower reaches of the table.
Short is eager to get his man as quickly as possible and a positive outcome from Friday's talks could see O'Neill sitting in the stands at Molineux. However, the Black Cats are taking nothing for granted as they attempt to find the man to revive the club's fortunes.
They have won only two of their 13 league games to date this season, and have managed three points at the Stadium of Light just three times this calendar year.
That record ultimately cost Bruce his job after almost two and a half years which had seen him invest heavily, but more than balance the books as the likes of Darren Bent and Jordan Henderson left for huge fees.
However, his failure to replace strikers Bent, Asamoah Gyan, who left on loan for the United Arab Emirates after just one season on Wearside, and loan signing Danny Welbeck proved pivotal with a chronic lack of goals hampering the club over the opening months of the new campaign.
As a result, any new manager would want assurances that he would be able to wheel and deal in January in an effort to bring a new balance to a squad which saw 11 incomings during the summer, and that is likely to represent a significant part of the ongoing negotiations.
Source: PA
Source: PA