© 2017 The Author(s). The current paradigm, widely incorporated in soil biogeochemical models, is that microbial methanogenesis can only occur in anoxic habitats. In contrast, here we show clear geochemical and biological evidence for methane production in well-oxygenated soils of a freshwater wetland. A comparison of oxic to anoxic soils reveal up to ten times greater methane production and nine times more methanogenesis activity in oxygenated soils. Metagenomic and metatranscriptomic sequencing recover the first near-complete genomes for a novel methanogen species, and show acetoclastic production from this organism was the dominant methanogenesis pathway in oxygenated soils. This organism, Candidatus Methanothrix paradoxum, is prevalent across methane emitting ecosystems, suggesting a global significance. Moreover, in this wetland, we estimate that up to 80% of methane fluxes could be attributed to methanogenesis in oxygenated soils. Together, our findings challenge a widely held assumption about methanogenesis, with significant ramifications for global methane estimates and Earth system modeling.