A method and device for processing a video signal using a reduced transform are provided. A method for decoding a video signal includes splitting a current block into a plurality of subblocks based on a first flag for a split direction of the current block, determining a subblock, to which a transform is applied, among the plurality of subblocks based on a second flag for a position of a transform target block, determining a transform target area in the subblock, and applying an inverse transform including a horizontal transform and a vertical transform to transform coefficients of the transform target area. The transform target area is determined based on a transform type applied to the subblock and a size of the subblock.