We show that the contact reduction can be specialized to Sasakian manifolds
. We prove that the Sasakian reduction is compatible with the Kahler reduct
ion both in the cone construction and in the Boothby-Wang fibration. In par
ticular, applying Futaki's results, we obtain a sufficient condition for th
e reduced space of a regular Sasakian-Einstein manifold to be Sasakian-Eins
tein. We present examples of Sasakian-Einstein manifolds obtained by S-1 re
duction of standard Sasakian spheres. (C) 2001 American Institute of Physic
s.