Permafrost contains an estimated 1672 Pg carbon (C), an amount roughly equivalent to the total currently contained within land plants and the atmosphere1,2,3. This reservoir of C is vulnerable to decomposition as rising global temperatures cause the permafrost to thaw2. During thaw, trapped organic matter may become more accessible for microbial degradation and result in greenhouse gas emissions4,5. Despite recent advances in the use of molecular tools to study permafrost microbial communities6,7,8,9, their response to thaw remains unclear. Here we use deep metagenomic sequencing to determine the impact of thaw on microbial phylogenetic and functional genes, and relate these data to measurements of methane emissions. Metagenomics, the direct sequencing of DNA from the environment, allows the examination of whole biochemical pathways and associated processes, as opposed to individual pieces of the metabolic puzzle. Our metagenome analyses reveal that during transition from a frozen to a thawed state there are rapid shifts in many microbial, phylogenetic and functional gene abundances and pathways. After one week of incubation at 5 °C, permafrost metagenomes converge to be more similar to each other than while they are frozen. We find that multiple genes involved in cycling of C and nitrogen shift rapidly during thaw. We also construct the first draft genome from a complex soil metagenome, which corresponds to a novel methanogen. Methane previously accumulated in permafrost is released during thaw and subsequently consumed by methanotrophic bacteria. Together these data point towards the importance of rapid cycling of methane and nitrogen in thawing permafrost.