Insertions and deletions (indels) are low-frequency deleterious genomic DNA alterations. Despite their rarity, indels are common, and insertions leading to long complementarity-determining region 3 (CDR3) are vital for antigen-binding functions in broadly neutralizing and polyreactive antibodies targeting viruses. Because of challenges in detecting indels, the mechanism that generates indels during immunoglobulin diversification processes remains poorly understood. We carried out ultra-deep profiling of indels and systematically dissected the underlying mechanisms using passenger-immunoglobulin mouse models. We found that activation-induced cytidine deaminase-dependent ±1-base pair (bp) indels are the most prevalent indel events, biasing deleterious outcomes, whereas longer in-frame indels, especially insertions that can extend the CDR3 length, are rare outcomes. The ±1-bp indels are channeled by base excision repair, but longer indels require additional DNA-processing factors. Ectopic expression of a DNA exonuclease or perturbation of the balance of DNA polymerases can increase the frequency of longer indels, thus paving the way for models that can generate antibodies with long CDR3. Our study reveals the mechanisms that generate beneficial and deleterious indels during the process of antibody somatic hypermutation and has implications in understanding the detrimental genomic alterations in various conditions, including tumorigenesis.