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The Black Cats announced the move on Saturday night after their 1-0 defeat by Manchester United saw them slip deeper into relegation trouble with the club sitting just a point clear of the Barclays Premier League relegation zone with seven games left to play.
The Wearside club's next game sees them face Chelsea before a north-east derby against fellow strugglers Newcastle.
Shearer expressed astonishment that Sunderland had released O'Neill with just seven matches left to retain their top-flight status.
Speaking on BBC1's 'Match of the Day', the former Newcastle striker and manager said: "It's bizarre. They have gone down the route that Reading have (sacking Brian McDermott).
"I look at him in the last few weeks and normally he comes on telly, we see him upbeat, looking forward to things.
"To me he's been down, he's not been his usual, energetic self - whether he's known that something is going on behind the scenes I don't know.
"They are on a terrible run of form but it is the timing of it I find hard.
"I think he might have missed his right-hand man John Robertson, who for the first time hadn't been with him at his side.
"For whatever reason didn't choose to go to Sunderland like he'd been with all his other clubs with him so I think he has probably missed him as well."
Fellow pundit Alan Hansen added: "The rewards for success and the penalties for failure have never been greater.
"Next season the new Premier League deal - if you are left behind, if you go down a division you are in massive trouble.
"You've got QPR, you've got Reading, you've got Southampton and now Sunderland: there are seven games to go.
Are they better with Martin or without him? I always thought Sunderland would be safe...for the first time today they were really poor.
"I think they are in massive trouble."
Stan Collymore played under O'Neill at Leicester and he too believed the Northern Irishman had missed having Robertson at his side.
He told talkSPORT: "Martin O'Neill is a dictatorial manager in the style of a Sir Alex Ferguson or a David Moyes - in other words he deals with everything.
"He knows the cost of everything, he wants total control of everything.
"John Robertson was the conduit between player and manager. When I was at Leicester I would go out and do the training with Steve Walford and everything would be quite jovial.
"John Robertson would watch training, perhaps go in a couple of times to see the manager who probably wouldn't even come out until the last 10, 15 minutes of the session where everything got much livelier because it was unusual for the gaffer to come out and oversee training - like Sir Alex Ferguson or like David Moyes - and what John Robertson would do would be to report back.
"Who's looking sharp, who's not looking so sharp and I think in terms of this season Martin O'Neill just hasn't looked himself.
"He hasn't had that sounding board with John Robertson, Robbo decided not to make the trek up north and from what I understand JR almost had enough of the modern-day footballer.
"I think that has had a massive impact."
Former Sunderland player Michael Gray said on Twitter: "So where do we go from here Sunderland? Do we just keep sacking managers or do we start pointing the finger at the players..!!!"
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