Insertion sequences (ISs) are transposable elements present in most bacterial and archaeal genomes that play an important role in genomic evolution. The increasing availability of sequenced prokaryotic genomes offers the opportunity to study ISs comprehensively, but development of efficient and accurate tools is required for discovery and annotation. Additionally, prokaryotic genomes are frequently deposited as incomplete, or draft stage because of the substantial cost and effort required to finish genome assembly projects. Development of methods to identify IS directly from raw sequence reads or draft genomes are therefore desirable. Software tools such as Optimized Annotation System for Insertion Sequences and IScan currently identify IS elements in completely assembled and annotated genomes, however, to our knowledge no methods have been developed to identify ISs from raw fragment data or partially assembled genomes. We have developed novel methods to solve this computationally challenging problem, and implemented these methods in the software package ISQuest. This software identifies bacterial ISs and their sequence elements-inverted and direct repeats-in raw read data or contigs using flexible search parameters. ISQuest is capable of finding ISs in hundreds of partially assembled genomes within hours, making it a valuable high-throughput tool for a global search of IS elements. We tested ISQuest on simulated read libraries of 3810 complete bacterial genomes and plasmids in GenBank and were capable of detecting 82% of the ISs and transposases annotated in GenBank with 80% sequence identity.