The centre-back was shown a straight red card for hacking down an opposition player late on in Baku as the Irish slumped to a fifth defeat in nine matches.
O'Neill admits that Evans should have done more to control his temper in such a situation.
"Jonny has admitted it was frustration so that was stupid for a player of his level and the level he plays at with Manchester United. He should know better," he told RTE.
"You could see frustration creeping into the players as the game went on, not only towards the opposition but also to the referee. We have to learn to control that."
Ireland play their final qualifier on Tuesday when they travel to Israel.