In this study, the finite element analysis of moisture absorption and residual stresses in plastic encapsulated IC packages is presented. During the moisture soaking test, moisture distributions in plastic encapsulated IC packages are evaluated by solving the diffusion equations. Thin LOC TSOP packages in various moisture soaking conditions are considered. The effects of temperature and humidity conditions on moisture distributions in TSOP packages are investigated in order to assess product reliability. Hygro-thermally induced deformations and stresses in plastic IC packages are also evaluated.