The contract will nearly certainly include a bonus for ending Scotland's major finals wait, which stretches back to 1998.
O'Neill has two years left on his current £500,000-a-year deal but has been offered a new four-year extension by Northern Ireland, believed to be worth £750,000 per annum.
After Scotland made clear their interest in the 48-year-old last year, the Irish FA responded with a new contract offer of its own. After a lengthy period of legal checks and further due diligence by the SFA, agreement has been reached between the associations.
Sunderland failed with overtures towards O'Neill and his immediate future now looks to be on the worldwide stage but he has stressed a desire to see the matter resolved in the near future.
The former Shamrock Rovers manager will need to be convinced by the SFA of the switch being beneficial to his career.
Hearts defender Hughes, a stalwart in O'Neill's side over the past six years, explained that the country are desperate to retain the man who guided them to their first ever European Championship finals in 2016.
Edinburgh-based O'Neill guided Northern Ireland to the Euro 2016 finals and only missed out on qualification for the World Cup Finals in Russian Federation following a controversial penalty decision which gave Switzerland the edge in a tense play-off over two legs.