A package structure and a method of forming the same are provided. The package structure includes a package substrate, an interposer substrate, and a semiconductor device. The interposer substrate is disposed over the package substrate, wherein the interposer substrate has a bottom surface facing the package substrate and a first cavity formed on the bottom surface. The semiconductor device is disposed in the first cavity. The package substrate has a top surface facing the interposer substrate and a second cavity formed on the top surface, wherein the second cavity is configured to accommodate the semiconductor device.