MOTIVATION Distinguishing direct from indirect influences is a central issue in reverse engineering of biological networks because it facilitates detection and removal of false positive edges. Transitive reduction is one approach for eliminating edges reflecting indirect effects but its use in reconstructing cyclic interaction graphs with true redundant structures is problematic. RESULTS We present TRANSWESD, an elaborated variant of TRANSitive reduction for WEighted Signed Digraphs that overcomes conceptual problems of existing versions. Major changes and improvements concern: (i) new statistical approaches for generating high-quality perturbation graphs from systematic perturbation experiments; (ii) the use of edge weights (association strengths) for recognizing true redundant structures; (iii) causal interpretation of cycles; (iv) relaxed definition of transitive reduction; and (v) approximation algorithms for large networks. Using standardized benchmark tests, we demonstrate that our method outperforms existing variants of transitive reduction and is, despite its conceptual simplicity, highly competitive with other reverse engineering methods.