He described it as a "good move" for both the club and the experienced manager. While Celtic have yet to officially confirm it, the 74-year-old is believed to have agreed to a one-year contract with an option for another year.
Barnes, who was replaced by O'Neill as Celtic manager in 2000, is confident this arrangement will benefit all involved. He said: "Well, as you can see in football these days, there’s no such thing as a long-term appointment.
"I think it’s a good move for a big club like Celtic because if it doesn’t work out, he’s quite happy to step to the side. And he won’t have a long contract, so it won’t cost the club a lot of money.
“A few years ago you’d probably argue that you’d want a bit more stability and a manager with a longer contract but look what happened to Arne Slot at Liverpool. This is football."
O'Neill led Celtic to a Premiership and Scottish Cup double last season during two separate stints. He also took them to a Premier Sports Cup final, which his replacement, Wilfried Nancy, lost.
Barnes concluded: "I think the move suits Martin and Celtic."