Reducing the code size of embedded applications is one of the important constraint in embedded system design. Code compression can provide substantial savings in terms of size. In this paper, we introduce a novel and efficient hardware-supported approach. Our approach investigates the benefits of re-encoding the unused bits (we call them re-encodable bits) in the instruction format for a specific application to improve the compression ratio. Re-encoding those bits may reduce the size of decoding table by more than 37%. We achieve compression ratios as low as 44% (including all overhead that incurs). We have conducted evaluations using a representative set of applications and have applied it to two major embedded processors, namely MIPS and ARM.