The 7-foot-2 Oraby, who transferred from Rice in September, applied for a hardship waiver to compete immediately this season. It was granted Thursday afternoon, just more than 24 hours before USC's season opener.
"The sky is the limit for this guy," O'Neill told ESPN.com Thursday. "He can catch, he can shoot, he can pass and block shots and rebound. He's still developing, but he's a legit player."
Oraby, a native of Egypt, averaged 6.0 points, 3.6 rebounds and 1.6 blocks per game for Rice last season.
"Our team was ecstatic when we gave them the news," O'Neill said. "We've all seen how good he can be at practice. There are times when he's been dominant."
O'Neill said he'll go with a starting frontcourt of Dewayne Dedmon and UC Irvine transfer Eric Wise in Friday's season-opener against Coppin State. But he said Oraby will definitely see action.
"He's been working out with us," O'Neill said. "He's up to speed. He could end up starting for us in the near future."
Eventually, Dedmon, who started at center for USC while healthy last season, is expected to slide down to power forward.
Oraby has been practicing with the Trojans since official practices began Oct. 12. USC finished 6-26 last season and set a school record for losses.
ESPN.com's Jason King conributed to this report.