Large case-control genome-wide association studies primarily expose common variants contributing to disease pathogenesis with modest effects. Thus, alternative strategies are needed to tackle rare, possibly more penetrant alleles. One strategy is to use special populations with a founder effect and isolation, resulting in allelic enrichment. For multiple sclerosis such a unique setting is reported in Southern Ostrobothnia in Finland, where the prevalence and familial occurrence of multiple sclerosis (MS) are exceptionally high. Here, we have studied one of the best replicated MS loci, 5p, and monitored for haplotypes shared among 72 regional MS cases, the majority of which are genealogically distantly related. The haplotype analysis over the 45 Mb region, covering the linkage peak identified in Finnish MS families, revealed only modest association at IL7R (P = 0.04), recently implicated in MS, whereas most significant association was found with one haplotype covering the C7-FLJ40243 locus (P = 0.0001), 5.1 Mb centromeric of IL7R. The finding was validated in an independent sample from the isolate and resulted in an odds ratio of 2.73 (P = 0.000003) in the combined data set. The identified relatively rare risk haplotype contains C7 (complement component 7), an important player of the innate immune system. Suggestive association with alleles of the region was seen also in more heterogeneous populations. Interestingly, also the complement activity correlated with the identified risk haplotype. These results suggest that the MS predisposing locus on 5p is more complex than assumed and exemplify power of population isolates in the identification of rare disease alleles.