Gardner looks poised to complete a move to Birmingham if the two clubs can agree on a fee after the initial offer for the player was rejected.
The England Under-21 international has had only a bit-part role to play at Villa this season.
Walking away: England Under 21 international Craig Gardner looks set to leave Aston Villa for rivals Birmingham City in a bid to secure first team football
Wolves have also inquired about Gardner but Birmingham are the only club to have so far made a definite bid.
'I know Craig wants to play. In an ideal world, I would love to keep him. He is as genuine as they come,' said O'Neill.
Birmingham's £3m Craig Gardner bid rebuffed by Aston Villa as Martin O'Neill joins chase for Cardiff's Adam MatthewsBirmingham ready to tie down manager McLeish to contract extensionVilla boss O'Neill insists: Shorey isn't for sale but if somebody wants him.ASTON VILLA FC