In addition to the active/passive nature of the terms pointed out in the other answer, the words are also distinguished in terms of whether they describe a reduction in quality or quantity. If something is decreasing, it is getting smaller in a quantitative sense. If something is reducing, it can also be diminishing in a qualitative sense.
One could say "he was reduced to a shell of a man" or "the city was reduced to rubble", both of which describe a qualitative change. You cannot "decrease" a city to rubble, because there is no quantitative change - there is still one city, but its character has been diminished. "Reduce" can also be used in a quantitative sense, however, so it may be a bit more versatile than "decrease".