Bio-augmented systems based on methanotrophs are indispensable in curbing anthropogenic methane emissions from engineered landfills or dumpsites to curtail rising levels of greenhouse gases. Using a defined methanotroph culture immobilized on an inert material-based bio-carrier makes it possible to harness these methane emissions for creating value-added products, thus contributing to the circular bio-economy. The methane oxidation capacity of the model methanotroph Methylosarcina sp. LC-4, a prospective organism for biodiesel production using methane present in landfill gas, immobilized on several inert bio-carriers, was evaluated to identify a bio-carrier that provided optimum conditions for the process.Among the several bio-carriers evaluated, perlite and vermiculite were selected due to their high specific surface area and superior water-holding capacity, which result in the retention of nutrients and biomass and higher methane elimination capacity. While perlite showed high biomass holding capacity and methane transport, vermiculite supported a high growth of methanotrophs. LC-4 immobilized on perlite and vermiculite as the bio-carrier showed maximum methane elimination capacity (MEC) of 291.3 g m−2 day−1 and 155.5 g m−2 day−1, respectively. The low bed height of only 0.13 m and a short start-up period of 2–4 days are promising for use as alternate daily cover in a landfill. The recovered biomass had 12% (w/w) fatty acid methyl ester (FAME), with a high fraction of (∼85%) of C14–C18 saturated and monounsaturated fatty acids, suitable for biodiesel production. The combination of perlite and vermiculite increased MEC and FAME content levels. The current study demonstrated a new bio-augmented system designed with a pure methanotroph for methane elimination with a short start-up time and the valorization of the assimilated methane.