diff --git a/CHANGELOG.md b/CHANGELOG.md
index 8c9c7dc2..d5a1b061 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,3 +1,6 @@
+### Version 2.1.2
+ - Fix issue with PNG to Indexed reduction on images with transparency pixel ([#129](https://github.com/shssoichiro/oxipng/issues/129))
+
 ### Version 2.1.1
  - More fixes for alpha optimization on interlaced images ([#133](https://github.com/shssoichiro/oxipng/issues/133))
 
diff --git a/src/reduction/color.rs b/src/reduction/color.rs
index 432c100d..a1be2552 100644
--- a/src/reduction/color.rs
+++ b/src/reduction/color.rs
@@ -169,6 +169,13 @@ pub fn reduce_rgb_to_palette(png: &mut PngData) -> bool {
     }
     let mut reduced = Vec::with_capacity(png.raw_data.len());
     let mut palette = Vec::with_capacity(256);
+    if let Some(ref trns) = png.transparency_pixel {
+        assert_eq!(trns.len(), 6);
+        if trns[0] != trns[1] || trns[2] != trns[3] || trns[4] != trns[5] {
+            return false;
+        }
+        palette.push(vec![trns[0], trns[2], trns[4]]);
+    }
     let bpp: usize = (3 * png.ihdr_data.bit_depth.as_u8() as usize) >> 3;
     for line in png.scan_lines() {
         reduced.push(line.filter);
@@ -227,6 +234,10 @@ pub fn reduce_rgb_to_palette(png: &mut PngData) -> bool {
     png.raw_data = reduced;
     png.palette = Some(color_palette);
     png.ihdr_data.color_type = ColorType::Indexed;
+    if png.transparency_pixel.is_some() {
+        png.transparency_pixel = None;
+        png.transparency_palette = Some(vec![0]);
+    };
     true
 }
 
@@ -263,6 +274,13 @@ pub fn reduce_rgb_to_grayscale(png: &mut PngData) -> bool {
             }
         }
     }
+    if let Some(ref mut trns) = png.transparency_pixel {
+        assert_eq!(trns.len(), 6);
+        if trns[0..2] != trns[2..4] || trns[2..4] != trns[4..6] {
+            return false;
+        }
+        *trns = trns[0..2].to_owned();
+    }
     if let Some(sbit_header) = png.aux_headers.get_mut(&"sBIT".to_string()) {
         assert_eq!(sbit_header.len(), 3);
         sbit_header.truncate(1);
diff --git a/tests/files/issue-129.png b/tests/files/issue-129.png
new file mode 100644
index 00000000..1cf61e01
Binary files /dev/null and b/tests/files/issue-129.png differ
diff --git a/tests/regression.rs b/tests/regression.rs
index b09d3bf3..5a1855a8 100644
--- a/tests/regression.rs
+++ b/tests/regression.rs
@@ -410,6 +410,19 @@ fn issue_113_down() {
     );
 }
 
+#[test]
+fn issue_129() {
+    let input = "tests/files/issue-129.png";
+    test_it_converts(
+        input,
+        None,
+        ColorType::RGB,
+        BitDepth::Eight,
+        ColorType::Indexed,
+        BitDepth::Eight,
+    );
+}
+
 #[test]
 fn issue_133_black() {
     let input = "tests/files/issue-133.png";