The polyketide signaling metabolites bacillaene and dihydrobacillaene are biosynthesized in Bacillus subtilis on an enzymatic assembly line with both nonribosomal peptide synthetase (NRPS) and polyketide synthase (PKS) modules acting along with catalytic domains servicing the assembly line in trans. These signaling metabolites possess the unusual starter unit alpha-hydroxyisocaproate (alpha-HIC). We show here that it arises from initial activation of alpha-ketoisocaproate (alpha-KIC) by the first adenylation domain of PksJ (a hybrid PKS/NRPS) and installation on the pantetheinyl arm of the adjacent thiolation (T) domain. The alpha-KIC unit is elongated to alpha-KIC-Gly by the second NRPS module in PksJ as demonstrated by mass spectrometric analysis. The third module of PksJ uses PKS logic and contains an embedded ketoreductase (KR) domain along with two adjacent T domains. We show that this KR domain reduces canonical 3-ketobutyryl chains but also the alpha-keto group of alpha-KIC-containing intermediates on the PksJ T-domain doublet. This KR activity accounts for the alpha-HIC moiety found in the dihydrobacillaene/bacillaene pair and represents an example of an assembly-line dual-function alpha- and beta-KR acting on disparate positions of a growing chain intermediate.