Stam led the club to the Championship playoff final in his first season at the helm, but a difficult 2017-18 campaign has left the Royals in 20th position in the Championship table - just three points outside of the relegation zone.
A run of just one win in 19 league matches has seen Reading drop into a dangerous position, and Saturday's 3-2 defeat at Norwich City proved to be the final straw.
"Reading football club announce that Jaap Stam has left his position as manager of the club with immediate effect," read a statement on the club's official website.
"We would like to thank Jaap for his hard work and commitment to the club, in particular noting what he achieved in a memorable first season in club management, and we wish him the very best of luck in his future endeavours.
"We will now focus on identifying and recruiting the right person to take Reading football club forward. The club will make no additional comment at this time but will provide further updates as soon as possible."
Next up for Reading is a home game against Queens Park Rangers on Friday night.