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The purpose of this paper is to generalize the (Poisson) Optimal Reduction Theorem in Ortega and Ratiu [Momentum Maps and Hamiltonian Reduction. Progress in Mathematics 222. Boston, MA: Birkhauser. xxxiv, 497pp., 2004] to general proper Lie group actions on Dirac manifolds, formulated both in terms of point and orbit reduction. A comparison to general standard singular Dirac reduction is given emphasizing the desingularization role played by optimal reduction.