The West Bromwich Albion defender has been handed the captain's armband for Friday night's Euro2016 qualifier against Romania in Bucharest, replacing Southampton's Steven Davis who is out with a hamstring injury.
Regarding the temporary appointment, O'Neill suggested it was a natural choice to give McAuley captaincy rights for the crucial clash.
"I think Gareth made a very unselfish act in turning down the captaincy on his 50th cap in Greece," said O'Neill.
"Normally a player who reaches that milestone would captain the side but Gareth didn't want to upset the momentum we had so he passed over that opportunity.
"There were one or two players capable of being captain but I just felt it was fitting (to choose McAuley).
"He has natural leadership qualities and the respect of every member of the squad. It's fitting for Gareth to get the chance to captain the team in a game of this stature."
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