The carbon isotopic composition of methane produced in anoxic marine sediment is controlled by four factors: (1) the pathway of methane formation, (2) the isotopic composition of the methanogenic precursors, (3) the isotope fractionation factors for methane production, and (4) the isotope fractionation associated with methane oxidation. The importance of each factor was evaluated by monitoring stable carbon isotope ratios in methane produced by a sediment microcosm. Methane did not accumulate during the initial 42-day period when sediment contained sulfate, indicating little methane production from “noncompetitive” substrates. Following sulfate depletion, methane accumulation proceeded in three distinct phases. First, CO2 reduction was the dominant methanogenic pathway and the isotopic composition of the methane produced ranged from −80 to −94‰. The acetate concentration increased during this phase, suggesting that acetoclastic methanogenic bacteria were unable to keep pace with acetate production. Second, acetate fermentation became the dominant methanogenic pathway as bacteria responded to elevated acetate concentrations. The methane produced during this phase was progressively enriched in 13C, reaching a maximum δ13C value of −42‰. Third, the acetate pool experienced a precipitous decline from >5 mM to <20 μM and methane production was again dominated by CO2 reduction. The δ13C of methane produced during this final phase ranged from −46 to −58‰. Methane oxidation concurrent with methane production was detected throughout the period of methane accumulation, at rates equivalent to 1 to 8% of the gross methane production rate. Thus methane oxidation was too slow to have significantly modified the isotopic signature of methane. A comparison of microcosm and field data suggests that similar microbial interactions may control seasonal variability in the isotopic composition of methane emitted from undisturbed Cape Lookout Bight sediment.