McCarthy is becoming an increasingly influential figure at Goodison Park and again caught the eye in Saturday's Premier League clash at Chelsea, even though Everton eventually went down 1-0.
O'Neill, who attended the match, has been encouraged by the midfielder's willingness to try and make things happen for his team.
And the Ireland boss hopes McCarthy can take that confidence on to the international stage and play a central role in the qualifying campaign for Euro 2016.
"He did very well and it's about taking games by the scruff of the neck now," said O'Neill in the Liverpool Echo.
"Once in the second half, he drove forward by 30-40 yards with the ball and those are the things he can do."
"The longer he is playing as their first choice in the side, the more confidence he's getting and you would think that can only benefit us.
"It's what he's doing now, taking games by scruff of the neck."
Ireland have been drawn alongside Germany, Poland, Scotland, Georgia and debutants Gibraltar in qualifying for Euro 2016.