Gene fscTE, encoding a putative type II thioesterase (TEII), was associated with the FR-008/candicidin gene cluster. Deletion of fscTE reduced approximately 90% of the FR-008/candicidin production, while the production level was well restored when fscTE was added back to the mutant in trans. FscTE was unable to compensate for the release of the maturely elongated polyketide as site-directed inactivation of the type I thioesterase (TEI) totally abolished FR-008/candicidin production. Direct biochemical analysis of FscTE in parallel with its homologue TylO from the tylosin biosynthetic pathway demonstrated their remarkable preferences for acyl-thioesters (i.e., propionyl-S-N-acetylcysteamine [SNAC] over methylmalonyl-SNAC and acetyl-SNAC over malonyl-SNAC) and thus concluded that TEII could maintain effective polyketide biosynthesis by selectively removing the nonelongatable residues bound to acyl carrier proteins. Overexpression of FscTE under the strong constitutive ermE*p promoter in the wild-type strain did not suppress FR-008/candicidin formation, which confirmed its substrate specificity in vivo. Furthermore, successful complementation of the fscTE mutant was obtained with fscTE and tylO, whereas no complementation was detected with nonribosomal peptide synthetase (NRPS) TEII tycF and srfAD, reflecting substrate specificities of TEIIs distinctive from those of either polyketide synthases or NRPSs.