Elaiophylin is an unusual C-2-symmetric antibiotic macrodiolide produced on a bacterial modular polyketide synthase assembly line. To probe the mechanism and selectivity of diolide formation, we sought to reconstitute ring formation in vitro by using a non-natural substrate. Incubation of recombinant elaiophylin thioesterase/cyclase with a synthetic pentaketide analogue of the presumed monomeric polyketide precursor of elaiophylin, specifically its N-acetylcysteamine thioester, produced a novel 16-membered C-2-symmetric macrodiolide. A linear dimeric thioester is an intermediate in ring formation, which indicates iterative use of the thioesterase active site in ligation and subsequent cyclization. Furthermore, the elaiophylin thioesterase acts on a mixture of pentaketide and tetraketide thioesters to give both the symmetric decaketide diolide and the novel asymmetric hybrid nonaketide diolide. Such thioesterases have potential as tools for the in vitro construction of novel diolides.