Radio New Zealand International reports that after a day of parliament proceedings in which O'Neill largely frustrated his opponents' moves, the opposition said it had lodged a motion of no confidence against the prime minister with the Parliament Speaker, Job Pomat.
The opposition, meanwhile, selected Tari-Pori MP James Marape as its nominee for alternative prime minister.
Marape's resignation as finance minister last month sparked a series of resignations from the ruling People's National Congress party.
It has resulted in the most serious challenge to O'Neill's leadership since 2012, kicking off an intensive political fight between two similarly sized groups seeking to be the government.
A number of the MPs who have left the government claim that O'Neill has concentrated too much power on himself and a circle of cronies, while allowing bad governance to fester, RNZI reports.
The government and the opposition group have been lobbying in respective camps in Port Moresby hotels for the past several days.
At the weekend, both groups claimed they would have a majority in the 111-seat parliament, and today's return to parliament showed how the numbers are tight.
The opposition leader Patrick Pruaitch raised a motion to remove the Speaker but was defeated 59 votes to 50. It was the same margin in a vote to adjourn parliament, which the government again won.
Parliament is adjourned to May 28, giving O'Neill more time to consolidate his support in a fluid political environment following the resignations of some of his closest supporters.