Pseudohypoparathyroidism type Ib (PHP1B) is characterized predominantly by resistance to parathyroid hormone (PTH) leading to hypocalcemia and hyperphosphatemia. These laboratory abnormalities are caused by maternal loss-of-methylation (LOM) at GNAS exon A/B, which reduces in cis expression of the stimulatory G protein α-subunit (Gsα). Paternal Gsα expression in proximal renal tubules is silenced through unknown mechanisms, hence LOM at exon A/B reduces further Gsα protein in this kidney portion, leading to PTH resistance. In a previously reported PHP1B family, affected members showed variable LOM at exon A/B, yet no genetic defect was found by whole-genome sequencing despite linkage to GNAS. Using targeted long-read sequencing (T-LRS), we discovered an approximately 2800-bp maternally inherited retrotransposon insertion nearly 1200 bp downstream of exon XL not found in public databases or in 13,675 DNA samples analyzed by short-read whole-genome sequencing. T-LRS data furthermore confirmed normal methylation at exons XL, AS, and NESP and showed that LOM comprising exon A/B is broader than previously thought. The retrotransposon most likely causes the observed epigenetic defect by impairing function of a maternally derived NESP transcript, consistent with findings in mice lacking full-length NESP mRNA and in PHP1B patients with deletion of exon NESP and adjacent intronic sequences. In addition to demonstrating that T-LRS is an effective strategy for identifying a small disease-causing variant that abolishes or severely reduces exon A/B methylation, our data demonstrate that this sequencing technology has major advantages for simultaneously identifying structural defects and altered methylation.