A method of manufacture of an integrated circuit packaging system includes: forming a leadframe with a tiebar and an outer lead having an outer lead outer pad; forming an inner lead on a peel strip; attaching the leadframe to the peel strip around the inner lead; wire bonding a die to the outer lead and the inner lead; encapsulating the die and portions of the outer lead and the inner lead; removing the peel strip to expose a bottom surface of the inner lead; and removing the leadframe to have the outer lead outer pad of the outer lead coplanar with the bottom surface of the inner lead.