Methane is a greenhouse gas having well-known impacts on global radiative forcing. However, understanding the dynamics and thresholds of methane formation in peatlands, which undergo cyclic aeration and anoxia, is currently limited even though it is crucial for reliable estimation of methane emission to the atmosphere. The purpose of this study was to estimate the optimal range and thresholds of aeration conditions, which impact methane formation in upper layers of peat originating from a natural fen (East Poland). The experiment was conducted under laboratory conditions on two groups of differently treated soils which were incubated at field water capacity. One group was incubated in air and another in helium, both at temperatures of 5, 10 and 20 °C. Direct soil aeration estimation included measurements of redox potential and oxygen diffusion rate. The latter was used for the first time as an indicator of methane formation in soil. Both the aerated and anoxic groups showed that methane formation took place at ODR of below 20 μg O2 m−2 s−1 and Eh of below +240 mV which are the higher threshold levels for methanogenesis than previously reported. Maximum methanogenic activity amounted up to 71.86 mg CH4 kgDW−1 d−1. Aeration was capable of reducing this methanogenic activity by 28–100 %. Decreasing temperatures and aeration increased the time until the initiation of CH4 production (p < 0.05, n = 72).