Daunorubicin is a type II polyketide, one of a large class of polyaromatic natural products with anticancer, antibiotic, and antiviral activity. Type II polyketides are formed by the assembly of malonyl-CoA building blocks, though in rare cases, biosynthesis is initiated by the incorporation of a nonmalonyl derived starter unit, which adds molecular diversity to the poly-β-ketone backbone. Priming mechanisms for the transfer of novel starter units onto polyketide synthases (PKS) are still poorly understood. Daunorubicin biosynthesis incorporates a unique propionyl starter unit thought to be selected for by a subclass ("DpsC type") of priming ketosynthases (KS III). To date, however, no structural information exists for this subclass of KS III enzymes. Although selectivity for self-acylation with propionyl-CoA has previously been implied, we demonstrate that DpsC shows no discrimination for self-acylation or acyl-transfer to the cognate acyl carrier protein, DpsG with short acyl-CoAs. We present five crystal structures of DpsC, including apo-DpsC, acetyl-DpsC, propionyl-DpsC, butyryl-DpsC, and a cocrystal of DpsC with a nonhydrolyzable phosphopantetheine (PPant) analogue. The DpsC crystal structures reveal the architecture of the active site, the molecular determinants for catalytic activity and homology to O-malonyl transferases, but also indicate distinct differences. These results provide a structural basis for rational engineering of starter unit selection in type II polyketide synthases.