In this paper, a novel low bit-depth representation-based motion estimation approach with its hardware architecture is presented. The low bit-depth representation of pixels in the proposed method is constructed by choosing them from the gray-coded bit planes in an efficient way. Additionally, a new matching creation is also presented to improve the motion estimation accuracy. Thanks to the proposed binarization approach, the computation load is considerably reduced compared to filtering-based low bit-depth representation motion estimation methods. A novel hardware architecture for the proposed method is also presented in this paper. Experimental results revealed that the proposed motion estimation method and its hardware architecture provides a good balance between motion estimation accuracy and hardware resources especially for consumer electronics applications.