The microbial diversity associated with terrestrial groundwater seepage through permafrost soils is tightly coupled to the geochemistry of these fluids. Terrestrial alkaline methane seeps from Lagoon Pingo, Central Spitsbergen (78°N) in Norway, with methane-saturated and oxygen-limited groundwater discharge providing a potential habitat for methanotrophy. Here, we report on the microbial community’s comparative analyses and distribution patterns at two sites close to Lagoon Pingo’s methane emission source. To target methane-oxidizing bacteria from this system, we analysed the microbial community pattern of replicate samples from two sections near the main methane seepage source. DNA extraction, metabarcoding and subsequent sequencing of 16S rRNA genes revealed microbial communities where the major prokaryotic phyla were Pseudomonadota (42–47%), Gemmatimonadota (4–14%) and Actinobacteriota (7–11%). Among the Pseudomonadota, members of the genus Methylobacter were present at relative abundances between 1.6 and 4.7%. Enrichment targeting the methane oxidising bacteria was set up using methane seep sediments as inoculum and methane as the sole carbon and energy source, and this resulted in the isolation of a novel psychrophilic methane oxidizer, LS7-T4AT. The optimum growth temperature for the isolate was 13 °C and the pH optimum was 8.0. The morphology of cells was short rods, and TEM analysis revealed intracytoplasmic membranes arranged in stacks, a distinctive feature for Type I methanotrophs in the family Methylomonadaceae of the class Gammaproteobacteria. The strain belongs to the genus Methylobacter based on high 16S rRNA gene similarity to the psychrophilic species of Methylobacter psychrophilus Z-0021T (98.95%), the psychrophilic strain Methylobacter sp. strain S3L5C (99.00%), and the Arctic mesophilic species of Methylobacter tundripaludum SV96T (99.06%). The genome size of LS7-T4AT was 4,338,157 bp with a G + C content of 47.93%. The average nucleotide identities (ANIb) of strain LS7-T4AT to 10 isolated strains of genus Methylobacter were between 75.54 and 85.51%, lower than the species threshold of 95%. The strain LS7-T4AT represents a novel Arctic species, distinct from other members of the genus Methylobacter, for which the name Methylobacter svalbardensis sp. nov. is proposed. The type of strain is LS7-T4AT (DSMZ:114308, JCM:39463).