Muffs and beard (Mb) is a phenotype in chickens where groups of elongated feathers gather from both sides of the face (muffs) and below the beak (beard). It is an autosomal, incomplete dominant phenotype encoded by the Muffs and beard (Mb) locus. Here we use genome-wide association (GWA) analysis, linkage analysis, Identity-by-Descent (IBD) mapping, array-CGH, genome re-sequencing and expression analysis to show that the Mb allele causing the Mb phenotype is a derived allele where a complex structural variation (SV) on GGA27 leads to an altered expression of the gene HOXB8. This Mb allele was shown to be completely associated with the Mb phenotype in nine other independent Mb chicken breeds. The Mb allele differs from the wild-type mb allele by three duplications, one in tandem and two that are translocated to that of the tandem repeat around 1.70 Mb on GGA27. The duplications contain total seven annotated genes and their expression was tested during distinct stages of Mb morphogenesis. A continuous high ectopic expression of HOXB8 was found in the facial skin of Mb chickens, strongly suggesting that HOXB8 directs this regional feather-development. In conclusion, our results provide an interesting example of how genomic structural rearrangements alter the regulation of genes leading to novel phenotypes. Further, it again illustrates the value of utilizing derived phenotypes in domestic animals to dissect the genetic basis of developmental traits, herein providing novel insights into the likely role of HOXB8 in feather development and differentiation.