Allele-specific expression (ASE) refers to the differential abundance of the allelic copies of a transcript. RNA sequencing (RNA-seq) can provide quantitative estimates of ASE for genes with transcribed polymorphisms. When short-read sequences are aligned to a diploid transcriptome, read-mapping ambiguities confound our ability to directly count reads. Multi-mapping reads aligning equally well to multiple genomic locations, isoforms or alleles can comprise the majority (>85%) of reads. Discarding them can result in biases and substantial loss of information. Methods have been developed that use weighted allocation of read counts but these methods treat the different types of multi-reads equivalently. We propose a hierarchical approach to allocation of read counts that first resolves ambiguities among genes, then among isoforms, and lastly between alleles. We have implemented our model in EMASE software (Expectation-Maximization for Allele Specific Expression) to estimate total gene expression, isoform usage and ASE based on this hierarchical allocation.