A composition that includes a thermally conductive filler material that is fully wetted out by and encapsulated within a first polymer having a low tensile modulus, which in turn is uniformly dispersed throughout a second polymer resin. Since a low modulus polymer encapsulates the filler material, the interface adhesion between the second polymer resin and the encapsulated thermally conductive additives is improved thereby serving to enhance the mechanical properties of the resulting molded product. Similarly, a method is provided wherein a thermally conductive filler material is fully mixed into a first resin having a low tensile modulus. This resin and filler mixture is then incorporated and uniformly dispersed throughout a second resin to form a highly thermally conductive polymer molding composition.