The 29-year-old joined Sunderland last year on a short-term contract, but departed the club in January with a possible move to Nottingham Forest in the offing.
That move failed to transpire, with O'Neill now suggesting that the Scottish international could join the Premier League outfit once more.
O'Neill told the Sunderland Echo: "We let James's situation run past the transfer deadline and I think he went down to Nottingham Forest before [Alex] McLeish departed.
"But obviously events have changed that situation and I don't know what's happened since then. I'll speak to the agent though and see where we stand."
McFadden has also played for Everton.