O'Connor only left Australia for London on Monday to link with his new club Leicester, but a re-think by Schmidt means he now will fly back to help the Wallabies try to carve another slice of history.
He will be joined in the 34-man squad by halfback Jake Gordon, who makes his return from a hamstring injury that has seen him sidelined since the second British and Irish Lions Test.
The only new face in the squad, Gordon's return means Nic White will finally start his retirement, which he announced and then immediately delayed because of the NSW skipper's injury.
Lock Nick Frost (back) and Len Ikitau (knee laceration), who both missed the most recent loss to Argentina, have been included, while Will Skelton was again left out due to the match scheduling of his French club La Rochelle.
Despite some key performances to help the Wallabies to the top of the Rugby Championship standings, O'Connor was initially told by Schmidt he was free to head overseas, and the 35-year-old packed up his wife and dog and departed.
But Schmidt then opted to leave out an underdone Ben Donaldson and instead go with O'Connor as his third playmaker in the squad for the first Test at Auckland's Eden Park on September 27.
The selection call will be popular among O'Connor's teammates, who have been vocal about him remaining in the squad, citing the insight and experience he offered from his 68 Tests since making his debut back in 2008.
The Wallabies then host the All Blacks in Perth on October 4, needing to win both Tests to lift the Bledisloe Cup for the first time since 2002.
Australia haven't won the Rugby Championship in 10 years.
Looking to bust an Eden Park hoodoo that dates back to 1986, the Wallabies are also hoping to use the occasion to celebrate prop James Slipper becoming the first Australian to play 150 Tests.
He will join Welshman Alun-Wyn Jones and New Zealand's Sam Whitelock as the only players to reach the milestone.
The squad flies out to Auckland on Sunday, with Schmidt expecting New Zealand to be stinging after suffering a record loss to South Africa in their last outing.
"After an intense period, from the British and Irish Lions series, playing in South Africa and then here in Australia against Los Pumas, it's been ideal for players to take a breath before heading to Auckland for the fifth match in the Rugby Championship," Schmidt said in a statement."We know that the Championship has been incredibly competitive and that we will need to be better than we were last time out to have any chance against a fired-up All Blacks side."WALLABIES SQUAD:
FORWARDS: Allan Alaalatoa, Angus Bell, Josh Canham, Nick Champion De Crespigny, Nick Frost, Tom Hooper, Fraser McReight, Josh Nasser, Zane Nonggorr, Brandon Paenga-Amosa, Billy Pollard, Tom Robertson, Lukhan Salakaia-Loto, James Slipper, Carlo Tizzano, Taniela Tupou, Rob Valetini, Jeremy Williams, Harry Wilson
BACKS: Filipo Daugunu, Tane Edmed, Jake Gordon, Len Ikitau, Max Jorgensen, Andrew Kellaway, Ryan Lonergan, Tom Lynagh, Tate McDermott, James O'Connor, Hunter Paisami, Harry Potter, Hamish Stewart, Joseph-Aukuso Suaalii, Corey Toole
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