Moment-based distributionally robust optimization (DRO) provides an optimization framework to integrate statistical information with traditional optimization approaches. Under this framework, one assumes that the underlying joint distribution of random parameters runs in a distributional ambiguity set constructed by moment information and makes decisions against the worst-case distribution within the set. Although most moment-based DRO problems can be reformulated as semidefinite programming (SDP) problems that can be solved in polynomial time, solving high-dimensional SDPs is still time-consuming. Unlike existing approximation approaches that first reduce the dimensionality of random parameters and then solve the approximated SDPs, we propose an optimized dimensionality reduction (ODR) approach. We first show that the ranks of the matrices in the SDP reformulations are small, by which we are then motivated to integrate the dimensionality reduction of random parameters with the subsequent optimization problems. Such integration enables two outer and one inner approximations of the original problem, all of which are low-dimensional SDPs that can be solved efficiently, providing two lower bounds and one upper bound correspondingly. More importantly, these approximations can theoretically achieve the optimal value of the original high-dimensional SDPs. As these approximations are nonconvex SDPs, we develop modified Alternating Direction Method of Multipliers (ADMM) algorithms to solve them efficiently. We demonstrate the effectiveness of our proposed ODR approach and algorithm in solving multiproduct newsvendor and conditional value at risk (CVaR) problems. Numerical results show significant advantages of our approach on the computational time and solution quality over the three best possible benchmark approaches. Our approach can obtain an optimal or near-optimal (mostly within 0.1%) solution and reduce the computational time by up to three orders of magnitude.