A software package for detecting INDELs (INsertions and DELetions) mutations in a reference genome which has been sequenced with next-generation sequencing technology (e.g., Illumina). Scalpel is designed to perform localized micro-assembly of specific regions of interest with the goal of detecting mutations with high accuracy and increased power. Scalpel supports three modes of operation: single, de novo, and somatic. In the single mode, Scalpel detects indels in one single dataset (e.g., one individual exome). In the de novo mode, Scalpel detects de novo indels in a quad family (father, mother, affected child, unaffected sibling). In the somatic mode, Scalpel detects somatic indels from the sequencing data coming from matched tumor and normal samples.