Polyketide biosynthetic pathways have been engineered to generate natural product analogs for over two decades. However, manipulation of modular type I polyketide synthases (PKSs) to make unnatural metabolites commonly results in attenuated yields or entirely inactive pathways, and the mechanistic basis for compromised production is rarely elucidated since rate-limiting or inactive domain(s) remain unidentified. Accordingly, we synthesized and assayed a series of modified pikromycin (Pik) pentaketides that mimic early pathway engineering to probe the substrate tolerance of the PikAIII-TE module in vitro. Truncated pentaketides were processed with varying efficiencies to corresponding macrolactones, while pentaketides with epimerized chiral centers were poorly processed by PikAIII-TE and failed to generate 12-membered ring products. Isolation and identification of extended but prematurely offloaded shunt products suggested that the Pik thioesterase (TE) domain has limited substrate flexibility and functions as a gatekeeper in the processing of unnatural substrates. Synthesis of an analogous hexaketide with an epimerized nucleophilic hydroxyl group allowed for direct evaluation of the substrate stereoselectivity of the excised TE domain. The epimerized hexaketide failed to undergo cyclization and was exclusively hydrolyzed, confirming the TE domain as a key catalytic bottleneck. In an accompanying paper, we engineer the standalone Pik thioesterase to yield, 4 thioesterase (TEs148c) and module (PikAIII-TEs148c) that display gain-of-function processing of substrates with inverted hydroxyl groups.