A method for forming a package structure is provided. The method includes etching a top surface of a substrate to form a cavity. The substrate includes thermal vias directly under a bottom surface of the cavity. The method also includes forming at least one first electronic device in the cavity of the substrate. The first electronic device is thermally coupled to the thermal vias. The method further includes forming an encapsulating material in the cavity, so that the encapsulating material extends along sidewalls of the first electronic device and covers a surface of the first electronic device opposite the bottom surface of the cavity. In Addition, the method includes forming an insulating layer having an RDL structure over the encapsulating material. The RDL structure is electrically connected to the first electronic device.