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The design of complex systems is typically uncertain and ambiguous at early stages. Set-Based Design is a promising approach to complex systems design as it supports alternative exploration and gradual uncertainty reduction. When designing a complex system, functional requirements decomposition is a common and effective approach to progress the design incrementally. However, the current literature on Set-Based Design lacks formal guidance in functional requirements decomposition. To bridge the gap, we propose a formal process to hierarchically decompose the functional requirements for Set-Based Design. A four-step formal process is proposed to systematically define, reason, and narrow the sets, and eventually decompose the functional requirement into the sub-requirements. Such a process can be used by the individual suppliers working in parallel at multiple levels of abstraction and guarantee that the resulting system will eventually satisfy the top-level functional requirements. An example of designing a cruise control system is applied to demonstrate the feasibility of the proposed process.