The 25-year-old winger is widely regarded to have struggled to adapt to life at the Stadium of Light following a £12m move from Manchester City over the summer.
Johnson has scored four goals and has provided four assists for the Black Cats in the current campaign.
"I would be first to admit there is plenty left for him to produce," O'Neill told reporters.
"This is the type of form to show Roy Hodgson he should be in the England squad. I think it has been good for him to come here and there is miles more to come from him."
Johnson signed a four-year contract with Sunderland upon his arrival in the North-East.