We have developed an algorithm to detect copy number variants (CNVs) in homozygous organisms, such as inbred laboratory strains of mice, from short read sequence data. Our novel approach exploits the fact that inbred mice are homozygous at virtually every position in the genome to detect CNVs using a hidden Markov model (HMM). This HMM uses both the density of sequence reads mapped to the genome, and the rate of apparent heterozygous single nucleotide polymorphisms, to determine genomic copy number. We tested our algorithm on short read sequence data generated from re-sequencing chromosome 17 of the mouse strains A/J and CAST/EiJ with the Illumina platform. In total, we identified 118 copy number variants (43 for A/J and 75 for CAST/EiJ). We investigated the performance of our algorithm through comparison to CNVs previously identified by array-comparative genomic hybridization (array CGH). We performed quantitative-PCR validation on a subset of the calls that differed from the array CGH data sets.