Identifying genetic variants that are associated with methylation variation-an analysis commonly referred to as methylation quantitative trait locus (mQTL) mapping-is important for understanding the epigenetic mechanisms underlying genotype-trait associations. Here, we develop a statistical method, IMAGE, for mQTL mapping in sequencing-based methylation studies. IMAGE properly accounts for the count nature of bisulfite sequencing data and incorporates allele-specific methylation patterns from heterozygous individuals to enable more powerful mQTL discovery. We compare IMAGE with existing approaches through extensive simulation. We also apply IMAGE to analyze two bisulfite sequencing studies, in which IMAGE identifies more mQTL than existing approaches.