Integrated circuit packaging system with package underfill and method of manufacture thereof

A method of manufacture of an integrated circuit packaging system includes: providing a sacrificial carrier assembly having a stack interconnector thereover; mounting an integrated circuit having a connector over the sacrificial carrier assembly with the connector over the stack interconnector; dispensing an underfill material between the sacrificial carrier assembly and the integrated circuit with the underfill material substantially free of a void; encapsulating the integrated circuit over the sacrificial carrier assembly and the underfill material; exposing the stack interconnector by removing the sacrificial carrier assembly; and forming a base array over the underfill material and the stack interconnector.