Saprotrophic fungi, key players in global carbon cycling, have been identified as methane (CH4) sources not yet accounted for in the global CH4 budget. This study, for the first time, explores the influence of oxygen (O2) and temperature on CH4 production by two fungi, Laetiporus sulphureus and Pleurotus sapidus. To explore the relationship between these parameters and fungal CH4 formation, we examined CH4 formation under varying O2 levels (0 to 98%) and temperatures (17, 27, and 40 °C) during fungal growth on pine wood, beech wood, and grass under sterile conditions. Our findings show that fungal CH4 formation strongly depends on O2 levels. Methane formation was highest when O2 levels exceeded 5%, whilst no CH4 formation was observed after complete O2 consumption. Reintroducing O2 immediately resumed fungal CH4 production. Methane formation normalized to O2 consumption (CH4_norm) showed a different pattern. L. sulphureus showed higher CH4_norm rates with higher O2 levels, whereas P. sapidus showed elevated rates between 0 and 5%. Temperature also significantly influenced CH4 and CH4_norm rates, with the highest production at 27 °C, and comparatively lower rates at 17 and 40 °C. These findings demonstrate the importance of O2 levels and temperature in fungal CH4 emissions, which are essential for refining CH4 source predictions.