Cattermole's current contract with the Black Cats expires at the end of the season.
The Black Cats are expected to hold talks with the midfielder about an extension.
"Cattermole has been excellent since I came to the football club - and he may well have been before, I don't know about that," O'Neill told the Sunderland Echo.
"He's 24 and he's the captain of the side. Sometimes he needs to keep his discipline better because over the course of the year I expect he'll pick up a couple of silly bookings.
"I don't want to build him up too much though - particularly as he has a contract to sign here!"