The integration of rigid electronic components into stretchable materials is a complex challenge due to contrary material properties. This paper shows a novel approach for the embedding of electronic components into flexible and stretchable polymer substrates using a stereolithographic process that leads to stress reduction during stretching. The key factor is the multi-material printing with various elastic material properties. The paper shows a miniaturized packaged component (e.g. 0201 LED) in a flexible and stretchable substrate based on three different materials. The first material has rigid properties (stiffness 42.25 N/mm) and surrounds a small area of the LED with about 500 µm peripheral frame. The main purpose of this material is to round up the sharp edges of the LED to the next material. The second material is more elastic (stiffness 0.11 N/mm) and surrounds the first embedded LED. The purpose of the implementation of the second intermediate material is to spread the load between the LED and stretchable substrate caused by stretching. The third material has even higher elastic properties (stiffness 0.05 N/mm) and builds up the main part of the stretchable substrate (size of (4.5x34) mm²). After the fabrication of the multi-material substrate with the embedded LED, horseshoe conductive traces are screen printed with conductive paste. Finally, the embedded LED substrate with the conductive traces is cured at 125 °C. The final stretchable substrate with the embedded LED was able to stretch up to about 25 % for 30 cycles without disturbing the electrical function.