O'Neill missed Friday's loss by the Trojans to Arizona in the quarterfinals of the Pac-10 Tournament after USC Athletic Director Pat Haden suspended him hours before the contest.
The coach was disciplined for getting into a verbal confrontation with an Arizona fan at the team's Los Angeles hotel.
Haden lifted the ban Sunday, saying in a statement, "Coach O'Neill and I have talked numerous times these past few days. He has continued to express his regret and embarrassment over the incident that led to his suspension from any remaining games of the Pac-10 Conference Tournament."
"I temper my excitement of being reinstated with the realization that I made a serious error in judgment the other night," O'Neill added. "The disciplinary measures that Pat Haden took, including the suspension, were absolutely the right call."
The Trojans are considered a "bubble team" candidate for inclusion in this month's NCAA Tournament.