Adam Johnson's goal was enough for the Black Cats to take all three points at the Stadium of Light and O'Neill was delighted with what he saw.
"It was a great day, a great performance and to beat Manchester City was a big, big result for us," he told Sky Sports.
"They are champions of England and they are a really fine side, a fantastic side and early in the game you expect them to come into it and we fought off that challenge and came into game ourselves and scored a goal and created some great chances.
"It sounds crazy to say this but we could have scored a few more, that said Simon Mignolet has also made a couple of great saves in a brilliant performance by the team.
"We defended brilliantly in the game, but that is taking away from the chances we created - I know City were striving to get the equaliser and we felt we could take the opportunity, but we had some really great chances."
In the build-up to the goal, City were unhappy a foul against Pablo Zabaleta was not given, but O'Neill believes Sunderland deserved some good fortune.
"The referee didn't give it, but he [Zabaleta] did lie down and Steve Walford, my coach, said there could possibly have been a foul. I can't remember the last time that we had a bit of fortune, so if that was the case - Adam Johnson puts it in the net and gives us a boost."
O'Neill was quick to praise match-winner Johnson against his former club.
"He is showing signs, I thought he was excellent today - he wanted to take players on and we give him Carte blanche to do that and defensively he worked especially hard against Manchester City - his former team and he would obviously want to do well, but also for Sunderland."
The Sunderland boss is very happy with their current run of form which has seen them take nine points from the last 12 available.
"It has been tough work since start of the season which we felt it might be, but today has been terrific for us and gives us great confidence," he added.