O’Neill led Celtic to a league and cup double this season, and McNamara, who played under the gaffer for five years, believes his former boss is the right man for the job.
McNamara told BBC Scotland: “If he wants to stay another year I’d be delighted with that.
“Even if he wanted to go upstairs in some capacity, on the board or in recruitment or whatever. He’s shown how important he is.”
McNamara highlighted O’Neill’s success in securing two trophies this season, despite the challenges he faced as interim manager.
The Northern Irishman had little assurances this season where transfers were concerned due to his temporary position.
He said: “There was a lot of noise between the fans and the board and I think that noise has stopped the last few months because the focus was back on the team and on winning.”
However, McNamara believes O’Neill will want a greater say in recruitment if he remains in charge next season.
He said: “Anybody coming in would be looking for that.
“Martin knows what he needs moving forward to try and get into the Champions League.
“The recruitment side needs to be sorted with a sporting director coming in or head of recruitment or whatever title they’ll use.”