The 21-year-old has previously featured for the Saints in the Premier League and Europa League, while also representing England at international level up to the Under-20s.
Sims has slipped down the pecking order under Mark Hughes, though, and he has now been forced to drop into the second tier to play regular football over the next nine months.
Reading boss Paul Clement told the club's official website: "I'm really pleased that we have been able to bring Josh here on a season-long loan.
"He first came to my attention playing in the Premier League when I was manager at Swansea, and as soon as he came off the bench for Southampton I immediately noticed his athleticism and energy.
"He is a talented young player that can play on either side, he is a hard worker with a lot of ability and potential, and I'm delighted that he's joining us at Reading."
Reading have made a poor start to the 2018-19 campaign, losing to Derby County, Nottingham Forest and Bolton Wanderers in their first three games.