Biohythane may be used as an alternative feed for methanol production instead of costly pure methane. In this study, methanol production potential of Methylocella tundrae immobilized through covalent immobilization, adsorption, and encapsulation was evaluated. Cells covalently immobilized on groundnut shells and chitosan showed a relative methanol production potential of 83.9 and 91.6%, respectively, compared to that of free cells. The maximum methanol production by free cells and cells covalently immobilized on groundnut shells and chitosan was 6.73, 6.20, and 7.23 mM, respectively, using simulated biohythane as a feed. Under repeated batch conditions of eight cycles, cells covalently immobilized on chitosan and groundnut shells, and cells encapsulated in sodium-alginate resulted in significantly higher cumulative methanol production of 37.76, 31.80, and 25.58 mM, respectively, than free cells (18.57 mM). This is the first report on immobilization of methanotrophs on groundnut shells and its application in methanol production using biohythane as a feed.