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. © 2022 American Society for Bone and Mineral Research (ASBMR).