Three central steps during the biosynthesis of cytochalasan precursors, including reductive release, Knoevenagel cyclisation and Diels Alder cyclisation are not yet understood at a detailed molecular level. In this work we investigated the reductive release step catalysed by a hybrid polyketide synthase non-ribosomal peptide synthetase (PKS-NRPS) from the pyrichalasin H pathway. Synthetic thiolesters were used as substrate mimics for in vitro studies with the isolated reduction (R) and holo-thiolation (T) domains of the PKS-NRPS hybrid PyiS. These assays demonstrate that the PyiS R-domain mainly catalyses an NADPH-dependent reductive release of an aldehyde intermediate that quickly undergoes spontaneous Knoevenagel cyclisation. The R-domain can only process substrates that are covalently bound to the phosphopantetheine thiol of the upstream T-domain, but it shows little selectivity for the polyketide.