The hosts were hoping for a comfortable win to mark Cristiano Ronaldo's 100th cap, but were instead made to fight for a 1-1 draw at Porto's Dragao Stadium.
O'Neill said: "This is a team that is in its infancy in many ways, it's a transitional period for us, so to see them play with that spirit and discipline makes me immensely proud."
He added: "We have experienced players but also young and inexperienced players at club and international level, but we've done a lot of work and you've seen it pay off."
Niall McGinn's 30th-minute effort set up the prospect of a giant-killing act to rival the famous wins over Spain and England under Lawrie Sanchez, only for Helder Postiga to equalise with little more than 10 minutes left.
The exact nature of the performance is not one O'Neill would be eager to see on numerous occasions, with his side pinned back in their own half for the vast majority of the game and forced to summon a colossal defensive display to stay in contention.
But he said: "This is a group who want to learn and progress and have nights like this, to perform for Northern Ireland and make people proud of them again."
Northern Ireland went into the game on the back of a frustrating 1-1 draw of their own, against Luxembourg last month. That raised questions about the team's ability to close out results, but O'Neill feels they provided a perfect answer on this occasion.
"We said before the game that the most important thing was not to let anyone question their character," he said. "They certainly did that from one to 11, and there are also lads who didn't get involved in the match who have worked hard all week too.
"It was a huge success for us and hopefully a step in the right direction."
Source: PA
Source: PA