In the northern hemisphere, global warming is resulting in the thawing of permafrost. Permafrost degradation would have a dramatic impact on methane emission from wetlands in the permafrost area and thus regulate the feedback effects of wetlands in relation to global warming. In this paper, we reviewed the effect of permafrost degradation on methane emission in the northern wetland ecosystem. Permafrost degradation increased the active soil layer depth and caused a shift in plant species from neutral-growing to wet-growing, which enhanced methane emission in wetlands and produced positive feedback for global warming. The effect of altered water regimes on methane emission in wetlands was different among different types of permafrost regions. In continuous and discontinuous permafrost regions, wetter soil conditions due to permafrost degradation enhanced methane emission in wetlands. However, in sporadic permafrost regions, island permafrost thawing caused wetland drought conditions, leading to the disappearance of the soil surface water and thus decreasing methane emissions. Increased soil temperature induced by permafrost degradation increased methanogenic activity and thereby accelerated methane production; however, these warmer temperatures also increased methanotrophic activities, concurrently accelerating methane oxidation. Nonetheless, the composition of methanogens and methanotrophs in wetlands was changed dramatically by permafrost degradation; thereby, with the process of permafrost degradation, the ultimate effects of soil temperature and microbial composition and activity on methane emission in wetlands remain uncertain. In addition, permafrost degradation altered the soil freeze-thawing process, and thus seasonal patterns of methane emissions in wetlands. Finally, we addressed existing gaps in the research and identified a prospect for further study.