Controlling material properties over nanometer length scales is crucial for current and emerging high-density microelectronic device packages. Miniaturization of devices is increasingly limited by the ability to “connect” to the device, and the required packaging structures must be fabricated where layer thickness and feature sizes approach micron size scales while achieving the required mechanical, thermal and electrical properties. Second phase additions such as sub-micron sized particles are often added to locally adjust the material properties of constituent layers in the complex package structure. This results in significant variation of mechanical properties over sub-micron length scales. Such manipulation of material structure and its effects on mechanical and interfacial fracture behavior are addressed using experimental and modeling studies. Underfill layers consisting of an epoxy matrix with dispersed silica beads are shown to exhibit variations of elastic and flow properties in excess of three-fold across the layer thickness. Mechanical properties are not only affected by the distribution of second-phase fillers, but also by the adhesion properties of the filler/matrix interface. Interfaces are susceptible to stress corrosion cracking associated with moisture which can lead to progressive debond growth at loads much lower than that required to exceed the critical interface fracture energies. Subcritical debonding is affected by temperature, humidity, and the bond chemistry of the interface. The effects of these variations are considered on the adhesive and subcritical debonding behavior of interfaces between model epoxy underfills and SiNx chip passivation. Implications for other constrained complex layered structures are considered.