Numerous inbred mouse strains comprise models for human diseases and diversity, but the molecular differences between them are mostly unknown. Several mammalian genomes have been assembled, providing a framework for identifying structural variations. To identify variants between inbred mouse strains at a single nucleotide resolution, we aligned 26 million individual sequence traces from four laboratory mouse strains to the C57BL/6J reference genome. We discovered and analyzed over 10,000 intermediate-length genomic variants (from 100 nucleotides to 10 kilobases), distinguishing these strains from the C57BL/6J reference. Approximately 85% of such variants are due to recent mobilization of endogenous retrotransposons, predominantly L1 elements, greatly exceeding that reported in humans. Many genes' structures and expression are altered directly by polymorphic L1 retrotransposons, including Drosha (also called Rnasen), Parp8, Scn1a, Arhgap15, and others, including novel genes. L1 polymorphisms are distributed nonrandomly across the genome, as they are excluded significantly from the X chromosome and from genes associated with the cell cycle, but are enriched in receptor genes. Thus, recent endogenous L1 retrotransposition has diversified genomic structures and transcripts extensively, distinguishing mouse lineages and driving a major portion of natural genetic variation.