Polyketide synthases (PKSs) are molecular assembly lines that condense basic chemical building blocks for the production of structurally diverse polyketides. Many PKS biosynthetic gene clusters contain a gene encoding for a type II thioesterase (TEII). It is believed that TEIIs exert a proofreading function and restore or increase the productivity of PKSs by removing aberrant modifications on the acyl-carrier proteins (ACPs) of the PKS assembly line. Yet biochemical evidence is still sparse. Here, we investigated the function of PnG, the TEII of the phoslactomycin PKS (Pn PKS), in the context of its cognate assembly line in vitro. Biochemical analysis revealed that PnG preferentially hydrolyzes alkyl-ACPs over (alkyl)malonyl-ACPs by up to three orders of magnitude, supporting a proofreading role of the enzyme. We further demonstrate that PnG increases the in vitro production of different native and non-native tetra-, penta-, and hexaketide derivatives of phoslactomycin by more than one order of magnitude and show that these effects are caused by the initial clearing of the Pn PKS, as well as proofreading of the active assembly line. Finally, we demonstrate that PnG is able to release intermediate but notably also terminal polyketides from the Pn PKS. This allows PnG to functionally replace and overcome the terminal TEI activity of chimeric in vitro Pn PKS systems, as showcased with a phoslactomycin hexaketide system. Altogether, our experiments provide detailed insights into the molecular mechanisms and the multiple functions of PnG in its native context, as well as their potential use in future applications.