A method of manufacture of an integrated circuit packaging system includes: providing a base substrate; mounting a stack substrate over the base substrate with an inter-substrate connector directly on the stack substrate and the base substrate, the inter-substrate connector having an inter-substrate connector pitch; mounting an integrated circuit over the stack substrate, the integrated circuit having an internal connector directly on the stack substrate; and attaching an external connector directly on the base substrate, the external connector having an external connector pitch greater than the inter-substrate connector pitch.