The development of high-throughput sequencing technologies has advanced our understanding of cancer. However, characterizing somatic structural variants in tumor genomes is still challenging because current strategies depend on the initial alignment of reads to a reference genome. Here, we describe SMUFIN (somatic mutation finder), a single program that directly compares sequence reads from normal and tumor genomes to accurately identify and characterize a range of somatic sequence variation, from single-nucleotide variants (SNV) to large structural variants at base pair resolution. Performance tests on modeled tumor genomes showed average sensitivity of 92% and 74% for SNVs and structural variants, with specificities of 95% and 91%, respectively. Analyses of aggressive forms of solid and hematological tumors revealed that SMUFIN identifies breakpoints associated with chromothripsis and chromoplexy with high specificity. SMUFIN provides an integrated solution for the accurate, fast and comprehensive characterization of somatic sequence variation in cancer.