This paper presents our effort to reduce thermo-mechanical failures related IC packaging reliability problems. These reliability problems are driven by the mismatch between the different material properties. First of all, finite element analysis are adopted to investigate the influence of encapsulation structures and material properties on the stress distribution in dielectric layers and plastic strain distribution in die for a typical stacked package of IC microstructures. Results show that thinner package body, lower thermal stress and smaller plastic strain can be realized in this micro-structure with the different design geometry parameters and materials properties. Secondly, it was also found that the transition layer of TiN between the die and dielectric layer has a pronounced influence on decreasing the local stress in the passivation layer by comparison analysis. These studies would be beneficial to improve the reliability of stacked IC micro-structure packages.