The variational quantum eigensolver (VQE) is one of the most promising algorithms to find eigenvalues and eigenvectors of a given Hamiltonian on noisy intermediate-scale quantum (NISQ) devices. A particular application is to obtain ground or excited states of molecules. The practical realization is currently limited by the complexity of quantum circuits. Here we present a novel approach to reduce quantum circuit complexity in VQE for electronic structure calculations. Our algorithm, called ClusterVQE, splits the initial qubit space into subspaces (qubit clusters) which are further distributed on individual (shallower) quantum circuits. The clusters are obtained based on quantum mutual information reflecting maximal entanglement between qubits, whereas entanglement between different clusters is taken into account via a new dressed Hamiltonian. ClusterVQE therefore allows exact simulation of the problem by using fewer qubits and shallower circuit depth compared to standard VQE at the cost of additional classical resources. In addition, a new gradient measurement method without using an ancillary qubit is also developed in this work. Proof-of-principle demonstrations are presented for several molecular systems based on quantum simulators as well as an IBM quantum device with accompanying error mitigation. The efficiency of the new algorithm is comparable to or even improved over qubit-ADAPT-VQE and iterative Qubit Coupled Cluster (iQCC), state-of-the-art circuit-efficient VQE methods to obtain variational ground state energies of molecules on NISQ hardware. Above all, the new ClusterVQE algorithm simultaneously reduces the number of qubits and circuit depth, making it a potential leader for quantum chemistry simulations on NISQ devices.