Thermokarst lagoons form at the terrestrial-marine interface when thermokarst lakes, hotspots for Arctic methane emissions, erode onto the Arctic shelf. Thermokarst lagoons are dynamic environments with seasonal ice build-up and potential alternations between freshwater and marine discharge. Aiming to understand how microbial methane cycling changes along thermokarst lake to lagoon transitions we have investigated the sediment geochemistry and microbiota of the Polar Fox lagoon, a thermokarst lagoon in north-eastern Siberia, relative to that of two adjacent thermokarst lakes. In-situ methane concentrations, methane-carbon isotopic signatures, analysis of amplicon sequencing variants (ASVs), metagenomics, and pore-water geochemistry point towards efficient communities of anaerobic methane oxidizers (AOM) in a sulfate-methane transition zone 2-3 meters below the sediment surface of the lagoon. The lagoon’s in-situ methane concentration in the sulfate zone was only 0.4 – 5% that of the deeper sediment and of the two adjacent thermokarst lakes which have no connection to the Arctic Ocean. In the lakes, methane concentrations reached values up to 2.2 µmol per gram pointing towards oversaturation with methane in the sediment. Based on the analysis of general microbiome composition, we suggest that deterministic process triggered a substantial overall shift of microbial assemblages and a loss in spatial dissimilarity and diversity. Our study shows that thermokarst lake to lagoon transitions are associated with the formation of novel sediment microbiomes and that Arctic thermokarst lagoons can host efficient AOM communities with the potential to substantially mitigate methane concentrations in coastal thermokarst sediments.