Methane-fed biosystems have shown great potential for degrading various organic micropollutants, yet underlying molecular degradation mechanisms remain largely unexplored. In this study, we uncover the critical role of biogenic reactive oxygen species (ROS) in driving the degradation of 17β-estradiol (E2) within a methane-fed biofilm reactor. Metagenomic analyses confirm that aerobic methanotrophs, specifically Methylococcus and Methylomonas, are responsible for the efficient degradation of E2, achieving a degradation rate of 367.7 ± 8.3 μg/L/d. ROS scavenging in conjunction with enzyme inhibition experiments indicate that particulate methane monooxygenase (pMMO) and cytochrome P450 monooxygenase (CYP450) could generate hydroxyl radicals (•OH), which are the primary ROS involved in E2 degradation. Molecular dynamics simulations suggest that E2 can enter the active catalytic site of pMMO through electrostatic attraction. Four amino acid residues are found to form stable hydrogen bonds with E2, with a high binding free energy, indicating a high affinity for the substrate. Additionally, density functional theory calculations combined with transformation product analysis reveal that •OH targets carbon atoms on the benzene ring and the hydroxyl group attaches to the cyclopentane ring, primarily through hydrogen abstraction and hydroxylation reactions. This work provides critical insights into the mechanisms of E2 biodegradation in methane-fed systems and highlights the potential for optimizing microbial pathways to enhance the degradation of organic micropollutants from contaminated water.