Polyketides are a class of natural products that exhibit a wide range of functional and structural diversity. They include antibiotics, immunosuppressants, antifungals, antihypercholesterolemics, and cytotoxins. Polyketide synthases (PKSs) use chemistry similar to fatty acid synthases (FASs), although building block variation and differing extents of reduction of the growing polyketide chain underlie their biosynthetic versatility. In contrast to the well studied sequential modular type I PKSs, less is known about how the iterative type I PKSs carry out and control chain initiation, elongation, folding, and cyclization during polyketide processing. Domain structure analysis of a group of related fungal, nonreducing PKSs has revealed well defined N-terminal domains longer than commonly seen for FASs and modular PKSs. Predicted structure of this domain disclosed a region similar to malonyl-CoA:acyl-carrier protein (ACP) transacylases (MATs). MATs play a key role transferring precursor CoA thioesters from solution onto FASs and PKSs for chain elongation. On the basis of site-directed mutagenesis, radiolabeling, and kinetics experiments carried out with individual domains of the norsolorinic acid PKS, we propose that the N-terminal domain is a starter unit:ACP transacylase (SAT domain) that selects a C(6) fatty acid from a dedicated yeast-like FAS and transfers this unit onto the PKS ACP, leading to the production of the aflatoxin precursor, norsolorinic acid. These findings could indicate a much broader role for SAT domains in starter unit selection among nonreducing iterative, fungal PKSs, and they provide a biochemical rationale for the classical acetyl "starter unit effect."