A package structure and method for forming the same are provided. The method includes forming a through substrate via structure in a substrate, and forming a first trench in the substrate. The method includes stacking a first stacked die package structure over the substrate using a plurality of first bonding structures. The first bonding structures are between the substrate and the first stacked die package structure, and a there is plurality of cavities between two adjacent first bonding structures. The method also includes forming an underfill layer over the first stacked die package structure and in the cavities, and the underfill layer is formed in a portion of the first trench. The method further includes forming a package layer over the underfill layer.