Thermoelectric cooler (TEC) is a solid-state component that utilizes Peltier effect to dissipate the heat of the electronic packaging system. It shows unique advantages over conventional cooling technology by quiet operation, long lifetime, and ease of integration. However, the internal heat accumulation caused by Joule heat exposes the TEC to the risk of thermal-mechanical failure during long-term operation in realistic thermal environment. In this paper, a heat-generating chip was employed to the cold-end of the module to serve as the finite thermal load while the heat sink at the hot-end was modeled by heat transfer coefficient. Based on the thermoelectric (TE) and thermal stress analyses, we developed a three-dimensional numerical model of a compact TEC, which took into account the temperature dependent TE material properties. It was found that the thermal load attached to Peltier junction can cause extreme high levels of thermal stress, which might cause dislocations and cracks of the material layers. The influences of electrical current, leg length, ceramic plate and bonding layers on the thermal stress levels were examined. These results presented an optimized design with predictive thermo-mechanical performance to realize minimum thermal stress levels, which provided a useful guide to achieve high reliability in a compact TEC. (C) 2019 Elsevier Ltd. All rights reserved.