Acyltransferase (AT) domains of modular polyketide synthases exercise tight control over the choice of α-carboxyacyl-CoA substrates, but the mechanistic basis for this specificity is unknown. We show that whereas the specificity for the electrophilic malonyl or methylmalonyl component is primarily expressed in the first half-reaction (formation of the acyl-enzyme intermediate), the second half-reaction shows comparable specificity for the acyl carrier protein that carries the nucleophilic pantetheine arm. We also show that currently used approaches for engineering AT domain specificity work mainly by degrading specificity for the natural substrate rather than by enhancing specificity for alternative substrates.