The multi-particle states and rotational properties of two-particle bands in $^{254}$No are investigated by the cranked shell model (CSM) with pairing correlations treated by a particle-number conserving (PNC) method. For the first time, the rotational bands on top of two-particle $K^{pi}=3^+,8^-$ and $10^+$ states and the pairing reduction are studied theoretically in $^{254}$No. The experimental excitation energies and moments of inertia for the multi-particle state are reproduced well by the calculation. Better agreement with the data are achieved by including the high-order deformation $varepsilon_{6}$ which leads to enlarged $Z=100$ and $N=152$ deformed shell gaps. The rise of the $J^{(1)}$ in these two-particle bands compared with the ground-state band is attributed to the pairing reduction due to the Pauli blocking effects.