"(Let's) just say I think Jose would be an excellent choice, simple as that," he said in The Times.
O'Neill was in the running for the England job prior to McClaren's appointment in 2006, and reports suggested that he lost out due to a clash of opinions over England's development policy.
However, the Villa boss has denied the claims, saying: "That was not true. International football goes the same as club football, you have to win games.
"A first-team manager's job at most football clubs is pretty transient and your job is to win games."