This study presents a novel design for multilayer stretchable electronics that maintains high stretchability while significantly reducing the overall size. The proposed design, called the Vertically-Separated Multilayer Stretchable Circuit (VSMSC), enables the creation of compact, stretchable electronic systems with multiple layers. The VSMSC design features non-stretchable islands for rigid components and stretchable interconnectors that can absorb strain independently, allowing for efficient strain distribution and minimal mechanical strain. The design was validated through experimental and computational analyses, demonstrating that the VSMSC can achieve a similar degree of stretchability as single-layer electronics while being much more compact. The VSMSC was applied to develop a stretchable implantable bio-electronics system capable of measuring and stimulating heart activity, as well as a stretchable passive matrix LED display. The implantable bio-electronics system was tested in vivo, showing good biocompatibility and functionality. The LED display demonstrated the ability to operate under various deformations, including bending, stretching, and twisting, with minimal electrical degradation. The study also highlights the potential of the VSMSC design for future applications in stretchable electronics, particularly in devices requiring high-density, compact, and multifunctional circuits. However, the design has limitations in terms of reducing device size and stretchability due to the need for additional encapsulation layers and interconnectors. The results suggest that the VSMSC design can be a valuable approach for developing compact, stretchable electronics with complex functionalities.This study presents a novel design for multilayer stretchable electronics that maintains high stretchability while significantly reducing the overall size. The proposed design, called the Vertically-Separated Multilayer Stretchable Circuit (VSMSC), enables the creation of compact, stretchable electronic systems with multiple layers. The VSMSC design features non-stretchable islands for rigid components and stretchable interconnectors that can absorb strain independently, allowing for efficient strain distribution and minimal mechanical strain. The design was validated through experimental and computational analyses, demonstrating that the VSMSC can achieve a similar degree of stretchability as single-layer electronics while being much more compact. The VSMSC was applied to develop a stretchable implantable bio-electronics system capable of measuring and stimulating heart activity, as well as a stretchable passive matrix LED display. The implantable bio-electronics system was tested in vivo, showing good biocompatibility and functionality. The LED display demonstrated the ability to operate under various deformations, including bending, stretching, and twisting, with minimal electrical degradation. The study also highlights the potential of the VSMSC design for future applications in stretchable electronics, particularly in devices requiring high-density, compact, and multifunctional circuits. However, the design has limitations in terms of reducing device size and stretchability due to the need for additional encapsulation layers and interconnectors. The results suggest that the VSMSC design can be a valuable approach for developing compact, stretchable electronics with complex functionalities.