The production of renewable energy or biochemicals is gaining more attention to minimize the emissions of greenhouse gases such as methane (CH4) and carbon dioxide for sustainable development. In the present study, the influence of copper (Cu)- and iron (Fe)-based nanoparticles (NPs), such as Cu, Fe3O4, and CuFe2O4, was evaluated during the growth of methanotrophs for inoculum preparation and on the development of a polymeric-matrix-based encapsulation system to enhance methanol production from simulated biogas (CH4 and CO2). The use of simulated biogas feed and the presence of NP-derived inoculums produce a remarkable enhancement in methanol production up to 149% and 167% for Methyloferula stellata and Methylocystis bryophila free-cells-based bioconversion, respectively, compared with the use of pure CH4 as a control feed during the growth stage. Furthermore, these methanotrophs encapsulated within a polymeric matrix and NPs-based systems exhibited high methanol production of up to 156%, with a maximum methanol accumulation of 12.8 mmol/L over free cells. Furthermore, after encapsulation, the methanotrophs improved the stability of residual methanol production and retained up to 62.5-fold higher production potential than free cells under repeated batch reusability of 10 cycles. In the presence of CH4 vectors, methanol production by M. bryophila improved up to 16.4 mmol/L and retained 20% higher recycling stability for methanol production in paraffin oil. These findings suggest that Cu and Fe NPs can be beneficially employed with a polymeric matrix to encapsulate methanotrophs and improve methanol production.