Permafrost thaw is expected to increase methane (CH₄) emissions from northern peatlands, but it remains uncertain how thaw affects the microbial pathways driving CH₄ production and oxidation. We measured CH₄ and carbon dioxide (CO₂) fluxes during July 2022 using static chambers and combined these measurements with <em>&delta;</em>¹³C-CH₄ measurements, 16S rRNA and mcrA gene sequencing, as well as environmental data across a fine-scale thaw gradient in an interior Alaska peatland. Mean CH₄ fluxes increased from near neutral (-0.1 &plusmn; 0.02 &mu;mol m^-2 s^-1) in stable thaw stages to 40.2 &plusmn; 12.0 &mu;mol m^-2 s^-1 in advanced thaw stages, while CO₂ fluxes did not change. Thaw progression was associated with higher water tables and deeper seasonal thaw depths with an increase in methanogen relative abundance and shift in methanogen community composition. Hydrogenotrophic taxa increased in relative abundance with advanced thaw along the gradient, particularly <em>Methanoregula</em>, which explained 36 % of the variability in CH₄ fluxes. Despite this shift, emitted <em>&delta;</em>¹³C-CH₄ values fell within ranges commonly attributed to acetoclastic methanogenesis. Rayleigh fractionation modeling suggests that ~ 40 % of CH₄ produced at depth was oxidized before reaching the atmosphere, enriching residual CH₄ in ¹³C and altering the isotopic signature of emitted fluxes. These results highlight the need to integrate fluxes, isotopes, and microbial community data to fully resolve CH₄ cycling processes in thawing permafrost peatlands.