Various breakthroughs have being made recently in Capsule endoscopy (CE). As the technology gets more matured with more clinical acceptance rate, it’s time to explore the best way for fabricating, packaging and integrating the CE. This paper will present the development of a compact high resolution image module with a VGA CMOS sensor and in house RF-Baseband IC chip for capsule endoscopic applications. The complete module, inclusive of lens, measures 11.5 mm in diameter by 28 mm in length have being able to design, fabricate and assemble. 640x260 CMOS sensor, 0201 capacitors, resistors and LEDs, are assembled onto a rigid-flex PCB with processes such as reflow heating and auto highly accurate pick and place die placement. The optical imaging module is interfaced with a RF communication unit, consisting of a base-band IC and antenna, to enable wireless transmission of dynamic image data to an external data processing and visualization unit. Animal trials produces ex-vivo GI tissue images of superior quality in terms of color saturation, contrast and resolution compared with currently available commercial capsule imaging devices.