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The purpose of this paper is to achieve an indepth understanding of the effect of the filler size and surface treatment on material properties and therefore to design a nanocomposite formulation with desirable material properties for no-flow underfill applications. Mono-dispersed nanosilica filler of 100 nm in size were used in this study. An epoxy/anhydride mixture was used as the base resin formulation. The nanosilica fillers were incorporated into the resin mixture to different filler loadings from 5 wt% to 40 wt% with or without silane coupling agents as the surface treatment. Compared with micron-size silica, nanosilica did not interfere with the solder joint formation in the no-flow process, and it was transparent to visible light, which can benefit the flip chip assembly. Additionally, the CTE of nanosilica filled underfill was lower than that filled with micron silica at same loading level. However, nano-size filler also had some negative effects on the underfill materials due to large surface areas and interfacial interactions, including reducing the composite Tg, inhibiting the epoxy curing, extremely high viscosity at high loading level, high moisture absorption and low density. However, the results also showed that the compatibility between nanosilica and the epoxy matrix was greatly enhanced by silane modification of the nanosilica surface. Therefore, drawbacks caused by the incompatible interface between nanosilica and the epoxy matrix can be overcome.