The surface coatings of cereal plants are dominated by waxy β-diketones crucial for drought resistance and, therefore, grain yield. Here, barley (Hordeum vulgare) wax analyses reveal β-diketone and associated 2-alkanol ester profiles suggesting a common C16 3-ketoacid precursor. Isotope analysis further shows that the major (C31) diketone is synthesized from two plastidial C16 acyl units. Previous studies identified a gene cluster encoding enzymes responsible for β-diketone formation in barley, but left their biochemical functions unknown. Various assays now characterize one of these enzymes as a thioesterase producing long-chain (mainly C16) 3-ketoacids, and another one as a polyketide synthase (PKS) condensing the 3-ketoacids with long-chain (mainly C16) acyl-CoAs into β-diketones. The two enzymes are localized to the plastids and Endoplasmic Reticulum (ER), respectively, implying substrate transfer between these two sub-cellular compartments. Overall, our findings define a two-step pathway involving an unprecedented PKS reaction leading directly to the β-diketone products.