A method of manufacture of an integrated circuit packaging system includes: providing a substrate having a through hole; mounting an integrated circuit in the through hole, the integrated circuit having an inactive side and a vertical side; connecting a first interconnect in direct contact with the integrated circuit and the substrate; applying a wire-in-film adhesive around and above the integrated circuit leaving a portion of the vertical side and the inactive side exposed and covering a portion of the first interconnect; and mounting a chip above the integrated circuit and in direct contact with the wire-in-film adhesive.