An experimental and numerical study on laminar flame characteristics of methane oxy-fuel mixtures highly diluted with CO2 was conducted using a constant volume chamber and CHEMKIN package. The effects of high CO2 dilution on combustion chemical reaction, flame instability, and flame radiation of CH4/CO2/O-2 mixtures were studied. The laminar burning velocities of CH4/CO2/O-2 mixtures decrease with the increase of the CO2 fraction. CO, directly participates in the chemical reaction through the elementary reaction OH + CO = H + CO2 and inhibits the combustion process by the competition of the H radical between the reverse reaction of OH + CO = H + CO2 and the reaction H + O-2 = O + OH. This effect is more obvious for highly diluted CO2 in the case of CH4/CO2/O-2 mixtures. CO2 suppresses the flame instability by the combined effect of hydrodynamic and thermal-diffusive instabilities. The radiation of CH, oxy-fuel combustion is much stronger than that of CH4/air combustion mainly because of the existence of a large fraction of CO2 in CH4/CO2/O-2 flames, which will influence the wall temperature and temperature distribution in the gas turbine combustor.