Malonyl-CoA:ACP transacylase (MAT), the fabD gene product of Streptomyces coelicolor A3(2), participates in both fatty acid and polyketide synthesis pathways, transferring malonyl groups that are used as extender units in chain growth from malonyl-CoA to pathway-specific acyl carrier proteins (ACPs). Here, the 2.0 A structure reveals an invariant arginine bound to an acetate that mimics the malonyl carboxylate and helps define the extender unit binding site. Catalysis may only occur when the oxyanion hole is formed through substrate binding, preventing hydrolysis of the acyl-enzyme intermediate. Macromolecular docking simulations with actinorhodin ACP suggest that the majority of the ACP docking surface is formed by a helical flap. These results should help to engineer polyketide synthases (PKSs) that produce novel polyketides.