Aquatic habitats beneath ice masses contain active microbial ecosystems capable of cycling important greenhouse gases, such as methane (CH4). A large methane reservoir is thought to exist beneath the West Antarctic Ice Sheet, but its quantity, source and ultimate fate are poorly understood. For instance, O2 supplied by basal melting should result in conditions favourable for aerobic methane oxidation. Here we use measurements of methane concentrations and stable isotope compositions along with genomic analyses to assess the sources and cycling of methane in Subglacial Lake Whillans (SLW) in West Antarctica. We show that sub-ice-sheet methane is produced through the biological reduction of CO2 using H2. This methane pool is subsequently consumed by aerobic, bacterial methane oxidation at the SLW sediment–water interface. Bacterial oxidation consumes >99% of the methane and represents a significant methane sink, and source of biomass carbon and metabolic energy to the surficial SLW sediments. We conclude that aerobic methanotrophy may mitigate the release of methane to the atmosphere upon subglacial water drainage to ice sheet margins and during periods of deglaciation.