A method of manufacture of an integrated circuit packaging system includes: removing a portion of a leadframe to form a partially removed region and an upper portion of a peripheral lead on the leadframe first side; mounting a first integrated circuit over the partially removed region with a first adhesive; forming a first molding layer directly on the first integrated circuit and the peripheral lead; removing a portion of a leadframe second side exposing the first adhesive; mounting a second integrated circuit on the first adhesive of the first integrated circuit; forming a first interconnection layer directly on the first integrated circuit with the first integrated circuit and the peripheral lead electrically connected; and forming a second interconnection layer directly on the second integrated circuit with the second integrated circuit and the peripheral lead electrically connected.