Matrix isolation FTIR experiments have shown that methanol is a major product when argon gas doped with water and methane is exposed to an electrical discharge and condensed to a solid matrix at 11 K. Experiments with (2)H, (17)O and (18)O-labeled isotopologues show the mechanism for the methanol production is likely to be insertion of an excited oxygen atom in the (1)D state into a C-H bond of a methane molecule. In light of these experiments, the possibility of oxygen atom insertion into methane should be considered as a possible mechanism for the production of methanol in interstellar ices.