This study develops safety performance functions (SPFs) for severe (“KA” or “fatal and suspected serious injury”) distraction-related crashes along Kentucky’s rural and urban two-lane undivided roadway segments using recent four-year (2018–2021) crash records. Additional efforts were made to meticulously scrutinize crash narratives categorized as non-distracted and correct those cases. To account for crash under-dispersion, the Conway–Maxwell–Poisson, heterogeneous Conway–Maxwell–Poisson, zero-inflated Conway–Maxwell–Poisson, and zero-inflated heterogeneous Conway–Maxwell–Poisson (ZI-HTCMP) models were fitted and compared. The ZI-HTCMP model outperformed the other models with respect to several goodness-of-fit measures (e.g., mean absolute deviance and mean square prediction error). From the developed SPFs for rural and urban two-lane roads, wider lanes and higher speed limits (55 mph) were associated with increased severe distraction-related crash frequencies. Furthermore, some variables were found to be significant in rural areas, but insignificant in urban areas, and vice versa. For example, major collector roads, minor collector/local roads, the presence of roadside guardrails, wider right-hand shoulders, the presence of horizontal curves, and the presence of vertical grades were associated with increased crash frequencies along rural two-lane roads. In addition, the proportion of heavy vehicles (>5%) and the existence of paved shoulders were associated with increased crashes along urban two-lane roads. The empirical Bayes method was then used to rank the top 10 distraction-related high crash locations (HCLs) for both rural and urban two-lane segments. In-depth investigation of HCLs highlighted single-vehicle distraction-related crashes as the most common collision type. Countermeasures were proposed to help reduce severe distraction-related crashes, for example, installing chevron signs along rural two-lane roads.