A better understanding of the global terrestrial carbon cycle has become a policy imperative, both nationally and worldwide. About one third of the global soil carbon is preserved in northern latitudes, mainly in huge layers of frozen ground, which underlie around 24% of the exposed land area of the northern hemisphere. Terrestrial and sub-marine permafrost is one of the most vulnerable carbon pools of the Earth system. Permafrost soils can function as both a source and a sink for carbon dioxide and methane. Under aerobic conditions permafrost soil organic matter (SOM) is respired to CO₂, whereas under anaerobic conditions SOM is decomposed to CH₄ via a sequence of microbial processes. Thawing of permafrost could release large quantities of greenhouse gases into the atmosphere, thus further increasing global warming and transforming tundra ecosystems from a carbon sink to a carbon source. The atmospheric input of methane from permafrost soils in high latitudes of the northern hemisphere has been estimated to correspond to about 25% of methane emissions from natural sources. It is well known that methane fluxes in permafrost habitats are influenced by a number of biotic and abiotic parameters, including water regime, temperature, type of substrate, and vegetation as well as the availability of organic carbon. The biological formation and consumption of methane are carried out by very specialized microorganisms; methanogens and methanotrophs. Microbial methane production (methanogenesis) is a prominent process during the anaerobic decomposition of organic matter. Methanogenesis is solely driven by a small group of strictly anaerobic organisms called methanogenic archaea, which belong to the kingdom Euryarchaeota. In permafrost environments two main pathways of energy-metabolism by methanogens dominate: (i) the reduction of CO₂ to CH₄ using H₂ as a reductant (hydrogenotrophic methanogenesis) and (ii) the fermentation of acetate to CH₄ and CO₂ (acetoclastic methanogenesis). Methane transport from anaerobic soil horizons to the atmosphere is carried out via three major pathways: diffusion (slow), ebullition (fast), and plant-mediated transport. In contrast, methane-oxidizing bacteria, which belong to the γ- (type Ⅰ methanotrophs) and α-(type Ⅱ methanotrophs) Proteobacteria, are using methane as their sole carbon source, with consequent energy production by the oxidation of CH₄ to CO₂. Microbial methane oxidation in the oxic zones of the permafrost active layer is of great importance to the control of methane releases from permafrost environments. Most of the methane produced in the soil is oxidized by aerobic methane oxidizing bacteria before reaching the atmosphere. Hence, the biological oxidation of methane by methane-oxidizing bacteria is the major sink for methane in permafrost habitats. Currently, methanogenic archaea and methane-oxidizing bacteria have received a great deal of attention in permafrost studies, because of their pronounced distribution in permafrost soils and their consequent significance for the global methane budget. In this review, we examine the processes of methane cycling in permafrost soils. We also describe the methane-cycling microorganisms, including the possible impacts of global warming on their structure and function, and possible responses of the microbial communities to a changing environment.