Liverpool would not confirm a rumoured £2.5m bid for Young, whom Reds boss Roy Hodgson is believed to have tried to sign for Fulham last season. Young, 31, was made available for transfer in May.
"There has been an offer from a football club which Luke is mulling over," O'Neill said. The full-back joined Villa in summer 2008 from Middlesbrough in a £5m move and became a key performer in his first season at Villa Park. Last season he suffered early injury problems and was later given compassionate leave after the death of his brother.
"If [the move] doesn't materialise then he would join us [in Portugal for the Guadiana Cup]," added O'Neill. "He needs to play some football soon, so we'll see how that develops."