A method of manufacture of an integrated circuit packaging system includes: providing a stack substrate with a component side; connecting an integrated circuit component to the component side; attaching a conductive post to the component side and adjacent the integrated circuit component, the conductive post having a protruded end above the integrated circuit component; forming a protection layer on a top and sides of the protruded end, the protection layer having a width equal to a width of the conductive post; applying a stack encapsulation over the integrated circuit component, over the stack substrate, and around a portion of the conductive post, the protection layer exposed from the stack encapsulation; and mounting a base package under the stack substrate, base package connected to the stack substrate.