An in vitro trial was conducted in fermentation vessels under anaerobic conditions using composite feed-1 and composite feed-2 with inclusion of different levels of Coconut Oil (CO) along with buffered rumen liquor of sheep to observe the effects of oil on rumen methanogenesis and fermentation. The Composite Feed-1(CF-1) consisted of 40% of concentrate and Composite Feed-2 (CF-2) had 25 % of concentrate. The different levels of CO used were 0.5,1 and 2 µl/ml. Among the gas production and methane concentration parameters the inclusion of CO showed a significant decrease of 38.67%. A non significant effect on gas production was noted with the inclusion of CO in CF-2. Further, a decrease in total gas production and methane concentration was observed which was highly pronounced in CF-1 as compared to CF-2. The rumen digestibility by inclusion of CO in CF-1 and CF-2 decreased significantly (P < 0.01) from control.The inclusion of CO in CF-2 did not affect Ammonia Nitrogen (NH3 -N) concentration, while in CF-1 the CO inclusion increased the NH3 -N concentration. The inclusion of CO decreased the Total volatile fatty acid (TVFA) concentration significantly (P < 0.01). In both the diets namely CF-1 and CF-2 the A:P ratio was unaffected by CO inclusion. The inclusion of CO in CF-1 had a non significant effect in pH. However, the inclusion of CO in CF-1 and CF-2 decreased the protozoa number significantly (P < 0.01). Inclusion of oil tended to decrease Gas production (GP), Metabolizable energy (ME), Short Chain Fatty Acid (SCFA), True Degradability of Dry Matter (TDDM) and Microbial Biomass Production (MBP). The effect was more pronounced when CO level was 1.0µl/ml or higher. From the above gas production and fermentation parameters noticed in two diets CF-1 and CF-2 with inclusion of different levels of CO, it can be envisaged that increasing the proportion of concentrate in diets and using CO as a feed additive increases the rumen efficiency by reducing the methane concentration and gas production.