A man was held and later released by Gardai in Ballyshannon after Cllr O’Neill was sent a Mass Card in the post.
The threats came as arsonists burned down a house in Parkhill outside of the town – a €230,000 house bought by the council to accommodate a Traveller family of 12.
There has been nationwide controversy over ‘racist’ comments by Cllr Sean McEniff in which he said Travellers should not be allowed to live there.
However Cllr O’Neill never made any comments on Travellers.
He did oppose the council move because he believed the allocation was a breach of Council policy.
The Fine Gael politician claimed that social housing should only be provided outside in towns.
A close party aide said: “Barry is shock at this threat. He has behave impeccably throughout this and to get this sort of implied death threat is outrageous.”