A method is proposed which aims to reduce the hardware in FPGA-based circuits of Mealy finite state machines (FSMs). The proposed method is a type of structural decomposition method. Its main goal is the reducing the number of look-up table (LUT) elements in FSM circuits compared to the three-block FSM circuit. The main idea of the proposed method is the using codes of collections of FSM outputs for replacing the FSM inputs and state variables. The interstate transitions are defined using collections of outputs generated in two adjacent cycles of synchronization. One, of output collection codes, is kept into a register. To optimize block-generating FSM outputs, a new type of state codes is proposed. A state is encoded as an element of some class of states. This approach allows both the number of logic levels and inter-level interconnections in LUT-based FSM circuit to be diminished. An example of an LUT-based Mealy FSM circuit with the proposed method applied is shown. Moreover, the results of our research are represented. The research was conducted using the CAD tool Vivado by Xilinx. The experiments prove that the proposed approach allows the reduction of hardware compared with such known methods as Auto and One-hot of Vivado, and JEDI. Moreover, the proposed approach gives better results than a method based on the simultaneous replacement of inputs and encoding collections of outputs. Compared to circuits of the three-block FSMs, the LUT counts are reduced by an average of 10.07% without significant reduction in the value of operating frequency. The gain in LUT counts increases with the increasing the numbers of FSM states and inputs.