O'Neill recently stated his desire to get back into club management after he was linked with the Northern Ireland job, but it remains to be seen whether he would want to risk his reputation by returning to Leicester.
"It would be great to see him back in the game, first of all," former Foxes captain Lennon said.
"One of his old adages was that you never go back, but I think it is very, very tempting for him.
"There is a good foundation at Leicester and I think the Leicester fans would be more than thrilled to see him back because he had such success there in the late 90s and the early part of the century.
"He has been out of the game for a long time. It's the game's loss to have such a great character and manager out of the game and if he does get the job I will be thrilled for him."