CH₄ oxidation in landfill cover soils plays a significant role in mitigating CH₄ release to the atmosphere. Oxygen availability and the presence of co-contaminants are potentially important factors affecting CH₄ oxidation rate and the fate of CH₄-derived carbon. In this study, microbial populations that oxidize CH₄ and the subsequent conversion of CH₄-derived carbon into CO₂, soil organic C and biomass C were investigated in landfill cover soils at two O₂ tensions, i.e., O₂ concentrations of 21% (“sufficient”) and 2.5% (“limited”) with and without toluene. CH₄-derived carbon was primarily converted into CO₂ and soil organic C in the landfill cover soils, accounting for more than 80% of CH₄ oxidized. Under the O₂-sufficient condition, 52.9%–59.6% of CH₄-derived carbon was converted into CO₂ (CE_CO2-C), and 29.1%–39.3% was converted into soil organic C (CE_organic-C). A higher CE_organic-C and lower CE_CO2-C occurred in the O₂-limited environment, relative to the O₂-sufficient condition. With the addition of toluene, the carbon conversion efficiency of CH₄ into biomass C and organic C increased slightly, especially in the O₂-limited environment. A more complex microbial network was involved in CH₄ assimilation in the O₂-limited environment than under the O₂-sufficient condition. DNA-based stable isotope probing of the community with ¹³CH₄ revealed that Methylocaldum and Methylosarcina had a higher relative growth rate than other type I methanotrophs in the landfill cover soils, especially at the low O₂ concentration, while Methylosinus was more abundant in the treatment with both the high O₂ concentration and toluene. These results indicated that O₂-limited environments could prompt more CH₄-derived carbon to be deposited into soils in the form of biomass C and organic C, thereby enhancing the contribution of CH₄-derived carbon to soil community biomass and functionality of landfill cover soils (i.e. reduction of CO₂ emission).