The highly-rated 18-year-old has recently returned to Ewood Park after a successful spell with Rotherham.
O'Connell impressed during his time at Rotherham, making five appearances for Steve Evans' side.
The talented defender has yet to make his first team debut for Blackburn, but he is highly-regarded within the corridors of power at Ewood Park.
Rovers boss Michael Appleton is happy for him to go out on loan again so that he can gain some valuable first team experience.
O'Connell has represented England at Under-18 and Under-19 level and his arrival will be a major boost for York boss Gary Mills.