The super-skilled offensive defenceman parted company with Swedish side Leksands on Thursday night having failed to settle there, according to sources.
Sheffield appear to have been talking to him for some time.
He is just the tonic Steelers need - the player was top scorer last season and will return to supercharge the team's flagging power play.
The 29-year-old was voted the World Championship (D1A) Best Defenseman in the summer, as GB won the Division 1 A Gold Medal.
His return may see one of the defencemen used up front, as injuries remain an issue for Tom Barrasso's team.
O'Connor will be rushed back with the hope of facing Nottingham Panthers tomorrow.