A method of manufacture of an integrated circuit packaging system includes: providing a package substrate having a foldable segment, a base segment, and a stack segment; connecting a base substrate connector directly on the base segment; connecting a stack substrate connector directly on the stack segment; mounting a base integrated circuit over the base segment with the base substrate connector outside a perimeter of the base integrated circuit; and folding the package substrate with the stack segment over the base segment and the stack substrate connector directly on the base substrate connector.