SAR11 Alphaproteobacteria are the most abundant aerobic chemoheterotrophs in ocean surface waters. Previous studies have indicated SAR11 cells play an important role in marine carbon cycling and consume up to half of some common dissolved organic compounds, such as amino acids. During sequencing of the first SAR11 genome, genes for the oxidation of one carbon (C1) and methylated compounds were observed, which is very uncommon in proteobacteria, with the exception of methylotrophic species. The goal of this research was to study the metabolism of C1 and methylated compounds in SAR11, and to explore the implications of this for understanding the cycling of dissolved organic matter (DOM) in the oceans. Metabolic reconstruction from genome sequences and physiological experiments showed that SAR11 can utilize a variety of C1 and methylated compounds. The data showed that SAR11 strain HTCC1062 can oxidize methanol, formaldehyde, methylamine and methyl groups from glycine betaine (GBT), trimethylamine (TMA), trimethylamine N-oxide (TMAO), and dimethylsulfoniopropionate (DMSP). Interestingly, in addition to demethylating DMSP, strain HTCC1062 cleaved DMSP to the climatically active gas dimethyl sulfide (DMS) using a novel DMSP lyase. We propose that SAR11 cleaves DMSP to DMS when intracellular DMSP concentrations rise above a threshold, but below that threshold DMSP is channeled through the demethylation pathway to produce methanethiol that is used as a source of sulfur for growth. Investigation of transcriptional responses to five C1 compounds and methylated compounds revealed only a single case in which a gene was upregulated. The gene annotated as monomeric sarcosine oxidase (SAR11_1304) was upregulated in response to TMAO addition. SAR11_1304 was cloned and overexpressed in Escherichia. coli, and in vitro enzymatic assays showed that this protein has TMAO demethylase and dimethylamine monooxygenase activity, indicating it functions in the degradation pathway for TMAO. Overall, the data presented here reveal diverse metabolism in SAR11 for utilization of a variety of C1 and methylated compounds. This research provides insight into the metabolism of SAR11 and enhances understanding of the broad success of this ecologically significant organism. This work also indicates a surprisingly large role for C1 and methylated compounds in marine systems, and shows that broad insights into carbon cycling by marine microbes can be obtained by physiological experimentation based on genome predictions.