Beta-alkylations contribute to the vast structural diversity displayed by polyketide natural products. A unified pathway has been proposed for introduction of both beta-methyl and beta-ethyl branches catalyzed by hydroxymethylglutaryl-CoA synthase homologues that utilize acetyl- or propionyl-S-acyl carrier protein (ACP) as a substrate. While the origin of acetyl-S-ACP has been established, that of propionyl-S-ACP remains unknown. Here we report the characterization of LnmK from the leinamycin biosynthetic machinery as a bifunctional acyltransferase/decarboxylase (AT/DC) that derives propionyl-S-ACP from methylmalonyl-CoA, accounting for the missing link of the beta-ethyl or propionyl branch in polyketide biosynthesis. LnmK represents an emerging family of novel AT/DC enzymes and could be exploited by combinatorial biosynthesis methods to engineer novel polyketides, especially those with beta-alkyl branches.