The new Black Cats striker is still frozen out of Levein's Scotland squads after notifying the national team manager by text in February last year that he was not interested in representing his country following his omission from Euro2012 qualifiers.
This week, Fletcher revealed on Twitter that he would again be open to playing for Scotland when quizzed by one of his followers on the social networking site, however, there were reports that Levein is not prepared to give him another chance.
But O'Neill, who bought Fletcher from Wolves for around £14million last month, suggests that things need to be sorted out between the pair to instil some harmony within the Scotland setup and allow the player to compete at the highest level away from club duties.
"If you have a quality player and he is not playing for his country then it might need looking at," said O'Neill of Fletcher who has scored three goals in two appearances for Sunderland.
"Would I like to see him playing for Scotland at some stage? Of course.
"It might need an olive branch along the way. My thoughts are that Steven and the manager have had words in the past. That situation has not cleared up. There's some intransigence there.
"Am I going to provide that [mediation] at the minute? It's not really my job. I would need to know the ins and outs to do that.
"I touched on it briefly when he was signing here, in a casual conversation with Steven. I have not pursued it any further yet.
"Goals will give Steven confidence going forward. The last fortnight has been brilliant for him.
"I am not saying he will score 20 odd goals in a season but if he does I will be delighted. It has been a good start."