  We establish the existence of the phase transition in site percolation on
pseudo-random $d$-regular graphs. Let $G=(V,E)$ be an $(n,d,\lambda)$-graph,
that is, a $d$-regular graph on $n$ vertices in which all eigenvalues of the
adjacency matrix, but the first one, are at most $\lambda$ in their absolute
values. Form a random subset $R$ of $V$ by putting every vertex $v\in V$ into
$R$ independently with probability $p$. Then for any small enough constant
$\epsilon>0$, if $p=\frac{1-\epsilon}{d}$, then with high probability all
connected components of the subgraph of $G$ induced by $R$ are of size at most
logarithmic in $n$, while for $p=\frac{1+\epsilon}{d}$, if the eigenvalue ratio
$\lambda/d$ is small enough as a function of $\epsilon$, then typically $R$
spans a connected component of size at least $\frac{\epsilon n}{d}$ and a path
of length proportional to $\frac{\epsilon^2n}{d}$.
