Type III polyketide synthases (PKSs) biosynthesize varied classes of metabolites with diverse bio-functionalities. Inherent promiscuous substrate specificity, multiple elongations of reaction intermediates and several modes of ring-closure, confer the proteins with the ability to generate unique scaffolds from limited substrate pools. Structural studies have identified crucial amino acid residues that dictate type III PKS functioning, though cyclization specific residues need further investigation. PKSIII, a functionally and structurally characterized type III PKS from the fungus, is known to biosynthesize alkyl-resorcinol, alkyl-triketide- and alkyl-tetraketide-α-pyrone products. In this study, we attempted to identify residue positions governing cyclization specificity in PKSIII through comparative structural analysis. Structural comparisons with other type III PKSs revealed a motif with conserved hydroxyl/thiol groups that could dictate PKSIII catalysis. Site-directed mutagenesis of 120 and186 to and, respectively, altered product profiles of mutant proteins. While both C120S and S186C proteins retained wild-type PKSIII product activity, S186C favoured lactonization and yielded higher amounts of the α-pyrone products. Notably, C120S gained new cyclization capability and biosynthesized acyl-phloroglucinol in addition to wild-type PKSIII products. Generation of alkyl-resorcinol and acyl-phloroglucinol by a single protein is a unique observation in fungal type III PKS family. Mutation of 120 to bulky side-chain abrogated formation of tetraketide products and adversely affected overall protein stability as revealed by molecular dynamics simulation studies. Our investigations identify residue positions governing cyclization programming in PKSIII protein and provide insights on how subtle variations in protein cores dictate product profiles in type III PKS family.