The inevitable enteric gas emission from ruminants is considered a modern-day problem from an environmental perspective. Addressing this problem requires nutritional approaches such as the use of phytogenic additives in ruminant diets. In this regard, lupin seed (LS) can be a useful additive due to its phytochemical constituents. Therefore, this study investigated the effects of lupin (Lupinus angustifolius) seed supplementation as a functional and sustainable feed additive in sheep diet (5050 concentrate-to-forage ratio) on in vitro gas production (GP; mL/g DM), methane (CH4; mL/g DM) and carbon dioxide (CO2; mL/g DM) emissions, fermentation parameters, and nutrient degradability (g/kg DM incubated). Gas production and CH4 were measured per gram of incubated dry matter (DM), degradable DM (dDM), degradable neutral detergent fiber (dNDF), and degradable acid detergent fiber (dADF). Lupin seeds were included at 0 (control), 0.5, 1.0, 1.5, and 2% of the diet. The seeds contained 3.27% essential oils (DM basis), with eucalyptol as the main phytochemical. The highest GP per gram of DM and dDM was observed (p < 0.01) with 2.0% LS supplementation level. While 1.0% LS had the highest GP per gram of dNDF, 0.5% lupin diet had the highest GP per gram of dADF. Asymptotic GP and CH4 emissions linearly and quadratically increased (p < 0.01) with increasing LS level, while lag time decreased. Despite increased CH4 production, the proportion of CH4 in total biogas was lower (p = 0.008) for LS treatments than the control, with the 0.5% LS showing the lowest CH4 proportion. Production of CO2 increased with lupin seed treatments, with 0.5% LS producing the highest proportion (p = 0.027). Degradability of DM, NDF, and ADF was greater (p < 0.01) for the high LS supplementation level, while 0.5% supplementation level decreased ADF degradability. Total short-chain fatty acids, acetic acid, and propionic acid increased (p < 0.05) with LS supplementation level, leading to a reduced acetatepropionate ratio. Rumen pH decreased (p = 0.036) with LS supplementation, while ammonia-N decreased (p = 0.045) and estimated metabolizable energy increased (p < 0.001) linearly. Calculated microbial protein synthesis (p = 0.005) and gas yield (p = 0.047) increased with LS supplementation level. LS supplementation at 2.0% of diet (DM basis) increased GP and CH4 emission (mL/g DM) and enhanced nutrient degradability, suggesting its potential use as a functional feed additive for ruminants when supplemented at a 2.0% level into diet.