The separation of methane (CH4) from industrially–important nitrogen (N2)-rich vent streams such as those in liquefied natural gas processing plants is challenging. Pressure swing adsorption (PSA) is a promising, cost–effective solution in gas separation, especially for small–scale units. Further development and commercialisation of PSA–based technologies require access to low–cost, selective adsorbent materials. The current work investigates the improved separation of CH4 from N2 by TMA–Y zeolite which is obtained from the ion exchange treatment of Na–Y zeolite with the ammonium salt tetramethylammonium chloride (TMACl). TMA–Y is commercially called Ionic Liquidic Zeolite (ILZ), patented at The University of Western Australia, and has now been demonstrated on tonne–scale. In particular, we use a combination of experimental and molecular simulation techniques to provide insights into the high CH4–over–N2 selectivity of TMA–Y. For this, we obtain equilibrium isotherms of CH4 and N2 on Na–Y at different temperatures and pressures before and after ion exchange. The true selectivities of the zeolite samples are determined using the Ideal Adsorbed Solution Theory (IAST) and binary–gas grand–canonical Monte Carlo (GCMC) molecular simulations. From experiments and IAST calculations, we report an increase of >110% in the CH4/N2 selectivity of Na–Y after treatment with TMACl (from 2.2 to 4.7 at 5.0 MPa and 303.15 K for a mixture of 0.1 CH4+0.9 N2 mol.mol−1). GCMC molecular simulations provide a detailed picture of the molecular origins of this effect. Specifically, the introduction of TMA+ ions into the structure of Na–Y zeolite leads to a reduction of the available adsorption volume by more than 40% (from 0.30 to 0.17 cm3.g−1 with N2 as the probe molecule) for both adsorbing gas species (i.e. CH4 and N2). However, at the same time, this leads to stronger CH4–cation interactions due to the much higher affinity of TMA+ cations (5 kJ.mol−1) than extra–framework Na+ cations (1 kJ.mol−1) towards CH4. The overall effect of these two trends combined is the higher selectivity of the resulting TMA–Y zeolite for CH4. These molecular insights are useful in the systematic engineering of new materials with improved separation performance.