NEW YORK (AP) _ U.S. Sen. Alfonse D'Amato today announced his candidacy for a second term, saying that if re-elected he would struggle for ''the little fella'' by combating the drug trade and reforming the tax system.

''The American dream is as bright today as it has ever been,'' D'Amato, a Republican, told 250 supporters in Manhattan, his first stop on a six-city, two-day statewide tour. ''I think we want to fight to preserve that.''

Flanked by his family, state Republican leaders and Senate Majority Leader Robert Dole of Kansas, D'Amato said he would dedicate himself in a second term to restoring domestic tranquility by fighting the illegal drug trade.

''It's the scourge of the drug epidemic that threatens our young people'' and that fuels neighborhood crime, D'Amato said.

''We're going to beat that. And we're going to do it in a comprehensive manner,'' he said. ''And see to it that we once again enjoy that domestic tranquility that has begun to escape us.''

D'Amato hoisted his 3-month-old grandson and stressed his frequent theme of working to protect ''the forgotten middle class.''

''What about the interests of our people. What about the interest of the little fella? That's what our battle has been about,'' he said. ''And I think we've turned the corner.''

In fighting to protect working people, D'Amato said he would promote tax reform while retaining the deductibility of individual retirement accounts, which would be eliminated under a tax plan now before the Senate.

Three Democrats have announced candidacies for their party's nomination to challenge D'Amato: author and consumer advocate Mark Green; George McDonald, an advocate for the homeless; and Webster Tarpley, a follower of Lyndon LaRouche. Former State Power Authority chairman John Dyson also is expected to run.

The eventual Democratic nominee will face D'Amato's considerable financial resources. He has raised $6 million for his 1986 campaign and has spent less than $1 million of that.

D'Amato, 49, has earned the moniker ''the pothole senator'' from some Democrats by focusing heavily on constituent services and lobbying for federal funding for local projects.

Polls have said he has majority support in this predominantly Democratic state.