The 59-year-old Ulsterman, who has been touted as a possible candidate in the past, believes Tottenham boss Redknapp, who was today cleared of tax evasion charges, is the man to succeed the Italian following his resignation on Wednesday evening.
Asked after his side's 2-1 FA Cup fourth-round replay victory at Middlesbrough on Wednesday night if Redknapp would be his favourite, Sunderland boss O'Neill said: "Yes he would be.
"I think when Fabio was going to leave this summertime after the Euros anyway, that Harry would be favourite to take over.
"I think he should be and I think he deserves that opportunity as well. He should be the one.
"There has been a cry-out for an English manager now. His achievements at Tottenham in the last couple of years have been outstanding.
"He has got them through to the Champions League and they look as if they are going to get there again.
"He's done exceptionally well, and with the result today in the court case, that's no longer hanging over him and that will be a great relief to him."
Asked if he would like to be considered himself despite being a little more than two months into his job at the Stadium of Light, O'Neill said: "I have just said I think he [Redknapp] should be the one."
O'Neill's comments came hours after Capello's departure was announced, and the Irishman admitted he was saddened by the development.
He said: "I am really, really disappointed for him because he's earned the right to take the team trough to the finals. He got them there in the first place.
"He's a splendid manager, he's proven that over the years. I really am very, very disappointed for him, disappointed that it's come to that. I'm actually quite sad about it."
Boro manager Tony Mowbray too, was disappointed by Capello's untimely departure.
He said: "I suppose it says a lot for the man. I am personally disappointed.
"I have been in Fabio's company once or twice, he seems a genuine, hard-working, honest football manager, and yet it leaves the country in a predicament.
"I am assuming he has resigned from his job because he felt undermined by the powers above.
"Sometimes football managers like to control, particularly very successful football managers, like to control, and maybe he felt as if a modicum of control had been taken out of his hands.
"You have to respect the fact that that's his decision. Where it leaves our country going into a major championships...
"We will all listen to our radio stations and watch our 24-hour television rolling as the world's media decides where we are going next."
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