Aims: To explore new resources of methane-utilizing micro-organism and develop a microbial biosensing system for monitoring methane released from natural and semi-natural ecosystems. Methods and Results: A methane (CH4)-utilizing bacterial strain was isolated from paddy soil using CH4 as the sole carbon source and identified as Klebsiella sp. ME17 by phenotyping and 16S rDNA sequence analysis. The efficiency of CH4 utilization of strain ME17 was 83.2% by gas chromatography analysis. A microbial biosensing system for CH4 detection was developed by combining immobilized cells of strain ME17 with a dissolved oxygen sensor. It was found that response time of the system to CH4 was <90s. The dissolved O-2 consumption increased with increasing CH4 from 0% to 16.0% (v/v) demonstrating a positive linear relationship with a low detection limit of 0.2% (v/v). The relative standard deviation is 3.48%. Conclusions: Klebsiella sp. ME17 isolate is capable of utilizing CH4. The microbial biosensing system of strain ME17 has been successfully applied to measure standard CH4 sample with satisfactory results. Significance and Impact of the Study: This study suggests that certain strains of Klebsiella genus are capable of utilizing CH4. Our proposed method appears very attractive for CH4 measurement in coal mine.