Microorganisms often encode multiple non-orthologous metabolic modules that catalyze the same reaction. However, little experimental evidence actually demonstrates a selective basis for metabolic degeneracy. Many methylotrophs-microorganisms that grow on reduced single-carbon compounds-like Methylobacterium extorquens AM1 encode two routes for methylamine oxidation: the periplasmic methylamine dehydrogenase (MaDH) and the cytoplasmic N-methylglutamate (NMG) pathway. In Methylobacterium extorquens AM1, MaDH is essential for methylamine growth, but the NMG pathway has no known physiological role. Here, we use experimental evolution of two isolates lacking (or incapable of using) MaDH to uncover the physiological challenges that need to be overcome in order to use the NMG pathway for growth on methylamine as a carbon and energy source. Physiological characterization of the evolved isolates revealed regulatory rewiring to increase expression of the NMG pathway and novel mechanisms to mitigate cytoplasmic ammonia buildup. These adaptations led us to infer and validate environmental conditions under which the NMG pathway is advantageous compared to MaDH. The highly expressed MaDH enables rapid growth on high concentrations of methylamine as the primary carbon and energy substrate, whereas the energetically expensive NMG pathway plays a pivotal role during growth with methylamine as the sole nitrogen source, which we demonstrate is especially true under limiting concentrations (<1 mM). Tradeoffs between cellular localization and ammonium toxicity lead to selection for this apparent degeneracy as it is beneficial to facultative methylotrophs that have to switch between using methylamine as a carbon and energy source or just a nitrogen source.