This paper mainly focuses on the dimension reduction of unknown finite element (FE) solution coefficient vectors in two‐grid Crank–Nicolson FE (TGCNFE) method for the nonlinear Allen–Cahn equation. For this purpose, a new TGCNFE method for the nonlinear Allen–Cahn equation is first developed and the unconditional stability and errors of TGCNFE solutions are analyzed. Thereafter, the most important thing is to lower the dimension of the unknown FE solution coefficient vectors by a proper orthogonal decomposition, to establish a new reduced‐dimension extrapolated TGCNFE (RDETGCNFE) method, and to analyze the unconditional stability and errors of RDETGCNFE solutions. Moreover, the correctness of our theoretical results is validated by some numerical experiments.