Autozygosity mapping in consanguineous families has proven to be a powerful method for identifying recessive disease genes. Using this technique with whole genome SNP data generated from low density mapping arrays, we previously identified two genes that underlie autosomal recessive woolly hair (ARWH/hypotrichosis; OMIM278150), specifically P2RY5 and Lipase H (LIPH). In the current study, we sought to identify a novel disease locus for ARWH/hypotrichosis by analyzing two large consanguineous families from Pakistan who had initially been excluded for mutations at either of these disease loci by haplotype analysis with microsatellite markers. A genome-wide analysis of 10 members from each of the two families failed to identify significant regions of autozygosity or linkage. Upon genotyping an additional 10 family members in one of the families, parametric linkage analysis identified a region on chromosome 3q27 with evidence for linkage (Z = 2.5). Surprisingly, this region contains the LIPH gene. Microsatellite markers located within the LIPH gene were used for haplotype analysis and demonstrated that not one, but two haplotypes were segregating with the phenotype in each of these families. DNA sequencing identified two distinct LIPH mutations (280_369dup90 and 659_660delTA). Each affected individual (n = 38) was either homozygous for one mutation (n = 7 and 16 respectively), or compound heterozygous (n = 15). A review of the literature identified several reports of compound heterozygotes in consanguineous families. Prompted by this finding, we derived the probability that a patient affected with a recessive disease is carrying two mutations at the disease locus. We suggest that the validity of the IBD assumption may be challenged in large consanguineous families.