The Northern Irishman, then 59, signed a three-year contract to replace Steve Bruce, who had been sacked three days earlier.
O'Neill, a boyhood Sunderland fan, took over at the Stadium of Light after a 2-1 home defeat to Wigan had left the club 16th in the Premier League.
He was returning to management for the first time in 16 months following his resignation as Aston Villa boss in August 2010.
The former Leicester and Celtic boss, who had also had spells at Wycombe and Norwich, had been the bookmakers' favourite to succeed Bruce.
O'Neill was considered one of the game's leading managers after guiding Villa to three successive sixth-place finishes in the top flight and to the League Cup final in 2010, when they lost 2-1 to Manchester United.
He had also enjoyed success at Leicester, with whom he won promotion to the Premier League, and Celtic, who won three league titles, three Scottish Cups and a League Cup during his five years in charge.
His impact at Sunderland was instant. The Black Cats won seven of his first 10 fixtures to ease relegation fears before finishing the season in 13th place.
An eight-game winless run had left Sunderland back in 16th place and O'Neill, who won 16 of his 55 Premier League matches at the club, was replaced by Paolo Di Canio.