The 51-year-old guided the Royals to promotion from the Championship last season but leaves the Madejski Stadium following Saturday's 2-1 defeat to relegation rivals Aston Villa, which was the club's fourth league loss in a row.
"Reading Football Club has announced today the departure of manager Brian McDermott. Owner Anton Zingarevich wishes to place on record his thanks to Brian who had achieved great success with the club since taking over as Manager in December 2009," a statement on the club's official website said.
"Brian gained promotion to the Barclays Premier League last year for only the second time in the club's history thanks to a remarkable run at the end of last season. However, in our current situation, owner Anton Zingarevich felt that a change was necessary.
"The search for a successor will start immediately and it is hoped that a new manager will be in place as soon as possible to lead the fight against potential relegation."
McDermott was appointed Reading boss in January 2010 after a spell as caretaker manager. He leaves with the Royals in 19th place in the Premier League, four points adrift of safety.