Mignolet has been in fine form for the Black Cats so far this season, having secured seven clean sheets despite his side's flirtation with the bottom three.
O'Neill has been impressed by the 24-year-old shot-stopper's determination and has backed him to produce that form at international level with Belgium.
"He really wants to be good. His attitude is fantastic," O'Neill told reporters.
"He is always striving to improve. Even on some days off, he wants to come in and do the work.
"I think that determination to be really good at his trade has shone through, it really has shone through.
"Of course, we all know there's a fair difference between having the determination to do it and then allying that with the ability, but he is improving all the time. He has been brilliant.
"He is in severe competition with the big Belgian lad (Thibaut Courtois) as well to be the number one goalkeeper and with Belgium having such a fine side at the moment, that would be big for him."
O'Neill expressed his frustration over the number of injuries in his squad, with Danny Rose and Carlos Cuellar sidelined by hamstring complaints and John O'Shea still a doubt.
"It's not ideal for us, really, and that's a problem we have had to face for most of the season," he said.
"But we have to cope with it, that's the way it is."
However, O'Neill does hope to have 4 million-pound signing Alfred N'Diaye available for the first time against West Ham United this weekend.
"He is athletic," O'Neill said.
"Of course he is young enough that he can improve his own game and he's got a lot of determination about him.
"I think in time he will definitely improve us. He will give us a bit of extra vitality.
"But he hasn't played in the Premier League before, so it is going to be something new to him, but he is really up for the challenge."