O'Neill turned to the 25-year-old as defensive injuries, and particularly the ankle problem which has sidelined first-choice right-back Phil Bardsley since pre-season, bit hard into his resources, and his response has been impressive.
Gardner had previously taken on that role on occasions during his time under the Ulsterman at Aston Villa, but his manager believes he is better equipped this time around.
O'Neill said: "He has done very, very well indeed, Craig. He is essentially a midfield player.
"I probably didn't expect Phil Bardsley to be out for the length of time that he has been - he injured himself in the first three days of pre-season training.
"Craig has filled in there and he has done brilliantly for us, really brilliantly, and I couldn't really ask for any more.
"He has learned that position. He did fill in on occasions at Aston Villa there, but he is a stronger player now and I think he is a better player now.
"He is less daunted by it too. He always felt that wingers were coming at him left, right and centre. Now he is capable of coping with it."
Gardner joined Sunderland in a £6million switch from Birmingham during the summer of 2011 as a central midfielder and has made no secret of the fact that that is where he sees his long-term future.
However, even with skipper Lee Cattermole suspended for three games - he will complete his ban with the visit of derby rivals Newcastle to the Stadium of Light on October 21 - O'Neill has opted to keep him at the back.
The Black Cats boss admits Gardner's strengths suit a more advanced role, but his is happy that his versatility has allowed him to plug a gap which otherwise might have become a problem.
O'Neill said: "He is a midfield player and he is capable of scoring goals from midfield, that's one of his big strengths.
"He is one of the players capable of scoring double figures for us in the Premier League.
"He has got a fantastic shot with no back-lift. He hits the ball as hard as anybody in the Premier League and obviously, the closer he is to goal, the better chance he has of doing that, outside free-kicks and things like that.
"But the very fact that he can play in a number of positions is good news for us."