Frequency-domain multiplexing (fMux) is an established technique for the readout of large arrays of transition edge sensor (TES) bolometers. Each TES in a multiplexing module has a unique AC voltage bias that is selected by a resonant filter. This scheme enables the operation and readout of multiple bolometers on a single pair of wires, reducing thermal loading onto sub-Kelvin stages. The current receiver on the South Pole Telescope, SPT-3G, uses a 68x fMux system to operate its large-format camera of $sim$16,000 TES bolometers. We present here the successful implementation and performance of the SPT-3G readout as measured on-sky. Characterization of the noise reveals a median pair-differenced 1/f knee frequency of 33 mHz, indicating that low-frequency noise in the readout will not limit SPT-3Gs measurements of sky power on large angular scales. Measurements also show that the median readout white noise level in each of the SPT-3G observing bands is below the expectation for photon noise, demonstrating that SPT-3G is operating in the photon-noise-dominated regime.