Tuilagi was on top form as the Tigers destroyed local rivals Northampton Saints on Saturday and O'Connor is convinced the youngster can be a Lions hero this summer.
"If the Lions pick him it could be very, very bad for the Aussies," Australian O'Connor, who won a single cap for the Wallabies and coached the Brumbies, told the Daily Mirror.
"He's world class, for me as good a 13 as there is in the world.
"We do need to remember that he's only 21, he hasn't played a lot of first team rugby with us and he's developing on the international stage.
"But if we can put the systems in place and the bodies around him to get the best out of Manu, he will pose a threat to any defence."
Tuilagi's summer assignment may involve taking on the likes of Pat McCabe, Adam Ashley Cooper and Ben Tapuai but his immediate concern is Sunday's mouth-watering match up with Mathieu Basteraud.
Tuilagi got the better of his opposite number when the giant pair clashed as England beat France at Twickenham this spring and he is hoping for a similar outcome, and a similar scoreline, when Leicester travel to Toulon for their Heineken Cup quarter final.
"I am looking forward to that," said Tuilagi.
"He is a quality player but I played against him in the Six Nations and I'm looking forward to another tough test.
"It is more about us focusing on ourselves and what we need to do. We need to take this momentum and take it to Toulon right from the start like we did against Northampton.
"We have got to continue to work hard and turn it up a bit more in training for going to Toulon. They are a huge club and a great team."