Based on the fact that the Hankel matrix constructed by noise-free seismic data is lowrank (LR), LR approximation (or rank-reduction) methods have been widely used for removing noise from seismic data. Due to the linear-event assumption of the traditional LR approximation method, it is difficult to define a rank that optimally separates the data subspace into signal and noise subspaces. For preserving the most useful signal energy, a relatively large rank threshold is often chosen, which inevitably leaves residual noise. To reduce the energy of residual noise, we propose an optimally damped rank-reduction method. The optimal damping is applied via two steps. In the first step, a set of optimal damping weights is derived. In the second step, we derive an optimal singular-value damping operator. We review several traditional lowrank methods and compare their performance with the new one. We also compare these lowrank methods with two sparsity-promoting transform methods. Examples demonstrate that the proposed optimally damped rank-reduction method could get significantly cleaner denoised images compared with the state-of-the-art methods.