The delineation of the complex biosynthesis of the potent antibiotic mupirocin, which consists of a mixture of pseudomonic acids (PAs) isolated from Pseudomonas fluorescens NCIMB 10586, presents significant challenges, and the timing and mechanisms of several key transformations remain elusive. Particularly intriguing are the steps that process the linear backbone from the initial polyketide assembly phase to generate the first cyclic intermediate PA-B. These include epoxidation as well as incorporation of the tetrahydropyran (THP) ring and fatty acid side chain required for biological activity. Herein, we show that the mini-module MmpE performs a rare online (ACP-substrate) epoxidation and is integrated ('in-cis') into the polyketide synthase via a docking domain. A linear polyketide fragment with six asymmetric centres was synthesised using a convergent approach and used to demonstrate substrate flux via an atypical KS0 and a previously unannotated ACP (MmpE_ACP). MmpE_ACP-bound synthetic substrates were critical in demonstrating successful epoxidation in vitro by the purified MmpE oxidoreductase domain. Alongside feeding studies, these results confirm the timing as well as chain length dependence of this selective epoxidation. These mechanistic studies pinpoint the location and nature of the polyketide substrate prior to the key formation of the THP ring and esterification that generate PA-B.