Decentralized stochastic control (DSC) is a stochastic optimal control problem consisting of multiple controllers. DSC assumes that each controller is unable to accurately observe the target system and the other controllers. This setup results in two difficulties in DSC; one is that each controller has to memorize the infinite-dimensional observation history, which is not practical, because the memory of the actual controllers is limited. The other is that the reduction of infinite-dimensional sequential Bayesian estimation to finite-dimensional Kalman filter is impossible in general DSC, even for linear-quadratic-Gaussian (LQG) problems. In order to address these issues, we propose an alternative theoretical framework to DSC—memory-limited DSC (ML-DSC). ML-DSC explicitly formulates the finite-dimensional memories of the controllers. Each controller is jointly optimized to compress the infinite-dimensional observation history into the prescribed finite-dimensional memory and to determine the control based on it. Therefore, ML-DSC can be a practical formulation for actual memory-limited controllers. We demonstrate how ML-DSC works in the LQG problem. The conventional DSC cannot be solved except in the special LQG problems where the information the controllers have is independent or partially nested. We show that ML-DSC can be solved in more general LQG problems where the interaction among the controllers is not restricted.