Asked in the UK region's devolved assembly at Stormont if she backed the deal, O'Neill said she found it "incredulous" at a time when "public services are being cut left, right and centre".
O'Neill, also vice president of the pro-Irish unity party Sinn Fein, said "rather than buying weapons of war, I would rather see the money invested in public services".
O'Neill said she believed "the focus of the international community should always be to work towards negotiation and peace settlements".
The deal, announced in London on Sunday by UK Prime Minister Keir Starmer and described as "historic" by the UK defence ministry, will support 700 existing jobs at the Thales plant in Belfast.
It is the largest contract ever received by the French-owned firm's facility in Northern Ireland, according to the defence ministry, and will involve recruiting 200 additional staff.
The deal will see production of over than 5,000 lightweight-multirole missiles (LMM), which will treble production of these missiles at the Thales factory, the ministry said in a statement.
Earlier Monday, Gavin Robinson, leader of Northern Ireland's largest pro-UK unionist party the DUP, described the deal as "a hugely significant order".
It "recognises the significant contribution Thales has made to the ongoing efforts in Ukraine", said Robinson, who is also the MP for the area where the plant is located.
Robinson said previous missiles built in Belfast had been vital to Ukraine's defence.
"In fact, Ukraine would have fallen had it not been for the contribution from Belfast in the early phases," he said.
Defence Secretary John Healey said in a statement Sunday that the deal would "help protect Ukraine against drone and missile attacks and help deter further Russian aggression following any end to the fighting".
The deal is the second largest placed with Thales by the defence ministry, building on a previous contract for 650 missiles signed in September 2024, it said.
The first batch of missiles was delivered before Christmas, and this new contract will continue deliveries, it said.
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