Sidwell caught O'Neill's eye for Reading in his second match in charge of Villa in August, 2006, and he is delighted to land him from Chelsea to replace Gareth Barry.
"Steve played for Reading in my first match at Villa Park," said O'Neill. "You always take note of players who do well against you and he stuck in my mind. When we later played at Reading he scored two goals against us. Again, the quality of his performance stayed with me."
Sidwell, 25, has taken a pay cut of around £25,000 a week to sign a £40,000-a-week contract with Villa.