The American billionaire owner pulled the Irishman out of a meeting on Tuesday to hold clear-the-air talks and plot next year's campaign. It has been a fractious few weeks with various rumours circulating that the manager was set for the exit - some of them inspired by an uncharacteristic O'Neill outburst.
Lerner glossed over any cracks in their relationship during his annual press conference.
Making progress: Villa finished sixth this season and reached the final of the Carling Cup
'Martin will be back next year, managing,' he said. 'That's been settled. He and I have spoken on a number of occasions both in person and over the phone.
'I actually dragged him out of a series of meetings he had in London, trying to get plans for the summer underway. We feel very good about that. It represents continuity and clarity for the players.'
Staying put: O'Neill will be in charge at Villa Park next season
Explaining away O'Neill's outburst, in which the former Celtic boss insisted that he would have a say on his future during the close season, Lerner said it was merely an aberration following Chelsea's seven-goal victory in March.
He said: 'I put that down to the life and times of a professional football manager who deals week in and week out with scrutiny and questions from every angle. 'It was given according to his state of mind and that was going to be influenced by the pressure of players, games, expectations, injuries and the league table.
'If you catch a guy on any given day, he may express a certain feeling. Having said that, I could have issued a statement putting it to rest. It might have been better managed.'
Lerner said there had been 'debate' between the pair in January but denied there had ever been any block on O'Neill bringing fresh blood into Villa Park.
Villa's boss swerved questions when asked what the situation was at the turn of the year. What is clear, however, is that the investment that has been a hallmark of Lerner's four-year reign will not continue.
Summer exits? Habib Beye and Steve Sidwell could be sold in the off-season
The former credit card magnate has pumped around £180million of his own cash into Villa since buying the club. He has not put a brake on spending but it is clear that Villa's boss may now need to be more circumspect.
O'Neill's net spend in the transfer market has been £20m per season but the inference from the club's owner was that it is unlikely to continue.
The main man: Randy Lerner insists O'Neill is staying at Villa
O'Neill, along with the Lerner's right-hand man Paul Faulkner held a series of meetings with agents of six players yesterday - Steve Sidwell, Nigel Reo-Coker, Curtis Davies, Luke Young, Habib Beye and Nicky Shorey.Villa's boss clearly expects a busy summer.
Lerner added: 'I have given Martin the assurance that I wanted to take the team forward. 'There's money there to be spent on the team but I say that carefully within the context of knowing that the summer brings a very dynamic environment of players coming and going and rethinking existing contracts. I'm not saying simply: "Here's some new money - go and spend it".
'Our ambitions to get better remain and we are not in some sort of mode in which we are shutting the door on spending on players. But to say that alone would be misleading. I think there's a sell-to-buy policy in nearly every organisation on the planet. I think it's good business.'
'I don't think there is a glass ceiling in the Barclays Premier League because in my own slightly hysterical competitive side, I can see weaknesses in the other clubs.'
O'Neill's going nowhere! Boss to stay at Aston Villa after talks with LernerGregory of Nazareth: once rated one of England's top young coaches, ex-Aston Villa boss John now plies his trade in Israel Aston Villa 0 Blackburn 1: Woe for Dunne but better news on boss O'NeillASTON VILLA FC