We study the theory of degenerate three-wave mixing and the generation of squeezed microwaves using circuit quantum electrodynamics in solid state circuits. The Hamiltonian for degenerate three-wave mixing, which seemed to be given phenomenologically in quantum optics, is derived by quantum mechanical calculations. The nonlinear medium needed in three-wave mixing is composed of a series of superconducting charge qubits which are located inside two superconducting transmission-line resonators. Here, the multiqubit ensemble is present to enhance the effective coupling constant between the two modes in the transmission-line resonators. In the squeezing process, the qubits are kept in their ground states so that their decoherence does not corrupt the squeezing. The main obstacle preventing a large squeezing efficiency is the decay rate of the transmission-line resonator.