Whole-genome assembly is now used routinely to obtain high-quality draft sequence for the genomes of species with low levels of polymorphism. However, genome assembly remains extremely challenging for highly polymorphic species. The difficulty arises because two divergent haplotypes are sequenced together, making it difficult to distinguish alleles at the same locus from paralogs at different loci. We present here a method for assembling highly polymorphic diploid genomes that involves assembling the two haplotypes separately and then merging them to obtain a reference sequence. Our method was developed to assemble the genome of the sea squirt Ciona savignyi, which was sequenced to a depth of 12.7 x from a single wild individual. By comparing finished clones of the two haplotypes we determined that the sequenced individual had an extremely high heterozygosity rate, averaging 4.6% with significant regional variation and rearrangements at all physical scales. Applied to these data, our method produced a reference assembly covering 157 Mb, with N50 contig and scaffold sizes of 47 kb and 989 kb, respectively. Alignment of ESTs indicates that 88% of loci are present at least once and 81% exactly once in the reference assembly. Our method represented loci in a single copy more reliably and achieved greater contiguity than a conventional whole-genome assembly method.