We present a novel pipeline and methodology for simultaneously estimating isoform expression and allelic imbalance in diploid organisms using RNA-seq data. We achieve this by modeling the expression of haplotype-specific isoforms. If unknown, the two parental isoform sequences can be individually reconstructed. A new statistical method, MMSEQ, deconvolves the mapping of reads to multiple transcripts (isoforms or haplotype-specific isoforms). Our software can take into account non-uniform read generation and works with paired-end reads.