Failure localization in advanced packaging is a challenging task. Optoelectronic sampling Terahertz time-domain reflectometry (OES THz TDR) employs ultrafast lasers to generate high-frequency THz pulse. The THz pulse is coupled into advanced package trace using radio frequency probe. When there is an open or short failure in the circuit, TDR signal could be captured. Deconvolution processing method was introduced to remove noise from multiple reflections of the remaining circuit. A short failure model with remaining circuit was studied. After deconvolution, the TDR localization accuracy improves from 573μm to 12μm, and the correlation coefficient improved from 99.612% to 99.955%. Advanced package sample including substrate, C4 bump, interposer, and micro bump was analyzed. By comparing the TDR waveform of short failure sample and refences, the short failure is localized inside of the die. By destroying the failure sample and measuring the current-voltage curve, the short failure location is verified.