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Background ABCB4 functions as a phosphatidylcholine translocater, flipping phosphatidylcholine across hepatocyte canalicular membranes into biliary canaliculi. In people, ABCB4 gene mutations are associated with several disease syndromes including intrahepatic cholestasis of pregnancy, progressive familial intrahepatic cholestasis (type 3), primary biliary cirrhosis, and cholelithiasis. Hepatobiliary disease, specifically gallbladder mucocele formation, has been recognized with increased frequency in dogs during the past decade. Because Shetland Sheepdogs are considered to be predisposed to gallbladder mucoceles, we initially investigated ABCB4 as a candidate gene for gallbladder mucocele formation in that breed, but included affected dogs of other breeds as well. Results An insertion (G) mutation in exon 12 of canine ABCB4 (ABCB4 1583_1584G) was found to be significantly associated with hepatobiliary disease in Shetland Sheepdogs specifically (P < 0.0001) as well as other breeds (P < 0.0006). ABCB4 1583_1584G results in a frame shift generating four stop codons that prematurely terminate ABCB4 protein synthesis within exon 12, abolishing over half of the protein including critical ATP and a putative substrate binding site. Conclusions The finding of a significant association of ABCB4 1583_1584G with gallbladder mucoceles in dogs suggests that this phospholipid flippase may play a role in the pathophysiology of this disorder. Affected dogs may provide a useful model for identifying novel treatment strategies for ABCB4-associated hepatobiliary disease in people.