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I am new to cloud and AWS and we have the below problem statement.

We have an API on-premises and one of our partners want to access it. We are planning to create private link connecting & exposing the onPrem API from our vpc so that our partner VPC can connect to it. Could you please guide in how the target groups should look to configure to point to the APIs? The options just say "instance","ip address","lambda","alb". I am confused on how to proceed further . Pls help thanks.

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It is not clear how the API is currently setup.

If you want to expose your application hosted in onprem using endpoint service then you can create network load balancers and in target group use IP address to point the hosting platform in onprem. Then create vpc endpoint service and shared that with your partner account.

Please follow the link on setup. https://docs.aws.amazon.com/vpc/latest/privatelink/privatelink-share-your-services.html

Partner then can access using service endpont DNS or they can create custom DNS name in there domain pointing to service endpoint DNS.