Circular plates with radially varying thickness, stiffness, and density are widely used for the structural optimization in engineering. The axisymmetric flexural free vibration of such plates, governed by coupled differential equations with variable coefficients by use of the Mindlin plate theory, is very difficult to be studied analytically. In this paper, a novel analytical method is proposed to reduce such governing equations for circular plates to a pair of uncoupled and easily solvable differential equations of the Sturm-Liouville type. There are two important parameters in the reduced equations. One describes the radial variations of the translational inertia and flexural rigidity with the consideration of the effect of Poisson's ratio. The other reflects the comprehensive effect of the rotatory inertia and shear deformation. The Heun-type equations, recently well-known in physics, are introduced here to solve the flexural free vibration of circular plates analytically, and two basic differential formulae for the local Heun-type functions are discovered for the first time, which will be of great value in enriching the theory of Heun-type differential equations.