O'Neill, known for participating in the raid that killed former Al Qaeda leader Osama Bin Laden, told Fox News that viewers could "mark [his] words" on the claim that Lindh would "get back into Jihad."
"Now he's going to Northern Virginia where there are a lot of bad Imams, bad apples," O'Neill said while appearing on "The Daily Briefing."
He also called Lindh a "smart guy" who happened to believe in a particular ideology. Lindh, he indicated, wouldn't change his opinions because the U.S. treated him well.
"They believe in the caliphate here and then they believe in paradise. And that's where they're all going," he said of terrorists' beliefs.
Lindh was released from prison after serving 17 years for joining and supporting the Taliban. Before the Sept. 11 attacks, he traveled to Afghanistan as a convert to Islam.
O'Neill told Fox News host Dana Perino that the nation had yet to get tough enough in cracking down on radicalization of young people.
"We're too light on it and we want to make sure that it's a peaceful religion," he said, referring to perceptions of Islam. "For the most part, it is a peaceful religion but there is definitely a radicalized part ... They're not cracking down on it. They're doing this in the prisons and that radical ideology is in it for the long haul."
According to O'Neill, victory over terrorism would come with the help of peaceful Muslims, not just militarily action.