Most humans harbor both CD177neg and CD177pos neutrophils but 1–10% of people are CD177null, placing them at risk for formation of anti-neutrophil antibodies that can cause transfusion-related acute lung injury and neonatal alloimmune neutropenia. By deep sequencing the CD177 locus, we catalogued CD177 single nucleotide variants and identified a novel stop codon in CD177null individuals arising from a single base substitution in exon 7. This is not a mutation in CD177 itself, rather the CD177null phenotype arises when exon 7 of CD177 is supplied entirely by the CD177 pseudogene (CD177P1), which appears to have resulted from allelic gene conversion. In CD177 expressing individuals the CD177 locus contains both CD177P1 and CD177 sequences. The proportion of CD177hi neutrophils in the blood is a heritable trait. Abundance of CD177hi neutrophils correlates with homozygosity for CD177 reference allele, while heterozygosity for ectopic CD177P1 gene conversion correlates with increased CD177neg neutrophils, in which both CD177P1 partially incorporated allele and paired intact CD177 allele are transcribed. Human neutrophil heterogeneity for CD177 expression arises by ectopic allelic conversion. Resolution of the genetic basis of CD177null phenotype identifies a method for screening for individuals at risk of CD177 isoimmunisation.