Abstract. Carbon dioxide (CO₂) and methane (CH₄) are the two most important anthropogenic greenhouse gases. SCIAMACHY on ENVISAT is the first satellite instrument whose measurements are sensitive to concentration changes of the two gases at all altitude levels down to the Earth's surface where the source/sink signals are largest. We have processed three years (2003–2005) of SCIAMACHY near-infrared nadir measurements to simultaneously retrieve vertical columns of CO₂ (from the 1.58 μm absorption band), CH₄ (1.66 μm) and oxygen (O₂ A-band at 0.76 μm) using the scientific retrieval algorithm WFM-DOAS. We show that the latest version of WFM-DOAS, version 1.0, which is used for this study, has been significantly improved with respect to its accuracy compared to the previous versions while essentially maintaining its high processing speed (~1 min per orbit, corresponding to ~6000 single measurements, and per gas on a standard PC). The greenhouse gas columns are converted to dry air column-averaged mole fractions, denoted XCO₂ (in ppm) and XCH₄ (in ppb), by dividing the greenhouse gas columns by simultaneously retrieved dry air columns. For XCO₂ dry air columns are obtained from the retrieved O₂ columns. For XCH₄ dry air columns are obtained from the retrieved CO₂ columns because of better cancellation of light path related errors compared to using O₂ columns retrieved from the spectrally distant O₂ A-band. Here we focus on a discussion of the XCH₄ data set. The XCO₂ data set is discussed in a separate paper (Part 1). For 2003 we present detailed comparisons with the TM5 model which has been optimally matched to highly accurate but sparse methane surface observations. After accounting for a systematic low bias of ~2% agreement with TM5 is typically within 1–2%. We investigated to what extent the SCIAMACHY XCH₄ is influenced by the variability of atmospheric CO₂ using global CO₂ fields from NOAA's CO₂ assimilation system CarbonTracker. We show that the CO₂ corrected and uncorrected XCH₄ spatio-temporal pattern are very similar but that agreement with TM5 is better for the CarbonTracker CO₂ corrected XCH₄. In line with previous studies (e.g., Frankenberg et al., 2005b) we find higher methane over the tropics compared to the model. We show that tropical methane is also higher when normalizing the CH₄ columns with retrieved O₂ columns instead of CO₂. In consistency with recent results of Frankenberg et al. (2008b) it is shown that the magnitude of the retrieved tropical methane is sensitive to the choice of the spectroscopic line parameters of water vapour. Concerning inter-annual variability we find similar methane spatio-temporal pattern for 2003 and 2004. For 2005 the retrieved methane shows significantly higher variability compared to the two previous years, most likely due to somewhat larger noise of the spectral measurements.