Inferior alveolar nerve (IAN) transpositioning is a modality utilized to manage posterior mandibular vertical deficiency. Several complications have been reported including improper implant positioning, mandibular body fracture, and neurosensory disturbance. The aim of this prospective observational study was to introduce a two-stage mental foramen distalization technique to minimize the complications associated with IAN transpositioning. Ten patients with severely atrophied mandibular ridges were included. Cone beam computed tomography was ordered to accurately locate the position of the IAN and its incisive terminal branch before designing the outline of two cortical osteotomies anterior and posterior to the mental foramen. The osteotomies were created using a piezoelectric device, followed by separation and identification of the nerve. The incisive branch was severed to freely transpose the IAN. A new foramen was created far distally and the cortical windows were repositioned and fixed with two screws. Healing was uneventful for all patients. Neurosensory recovery was assessed by MRC scale. All cases showed full recovery within 6 weeks, except for two patients who showed complete recovery after 16 weeks. Four months postoperative, all patients showed complete consolidation of the cortical windows without any signs of failure implants were placed at the pre-planned surgical sites. Histomorphometric analysis of core biopsies from seven surgical sites showed bone area percentages ranging from 46% to 63%. The two-stage mental foramen distalization technique is a predictable and safer technique for IAN transpositioning specifically in cases of vertical bone deficiency associated with limited inter-arch space.