The Royals have been known admirers of the Russian for a while now, and hope to complete a £4m deal for the player during the first week of the January transfer window.
The 31-year-old joined the Gunners from Zenit St. Petersburg for £15m in 2009, but has failed to consistently produce the form that earned him so many plaudits at Euro 2008.
According to Goal.com, Fulham and Zenit were also both keen on a move for Arshavin, but it appears that Reading, who have had a deal sanctioned by Russian owner Anton Zingarevich, have won the race for his signature.
Arshavin returned for a second spell at Zenit on loan last season but, with his family settled in London, he is thought to be keen on staying near the capital.
The playmaker has scored once in his 10 appearances for the North Londoners this campaign.