O’Neill told the Birmingham Mail: “We are hoping we can get something organised relatively quickly.
“We want Gabby to stay here. He has done very, very well, although it has been a long, long season for him. But he has got a future here and Gabby wants to stay around and wants to develop his game.
“We will get the whole thing together (length of contract) but in principle we are not too far away.”
O’Neill added: “Gabby has come on in leaps and bounds this season and he is on the brink of signing a new contract, designed to keep him here for the forseeable future.
“He knows that like the rest of us, he still has plenty to prove but he has shown a great willingness to work on his game and has a big part to play in our future.
“The potential of the side is reflected in the fact that three of our young players, Ashley Young, Agbonlahor and Gary Cahill have been selected for the England under 21s against Italy.”
