The 51-year-old only picked up the Premier League Manager of the Month award in January but a recent slump has forced the Royals board to act.
The Berkshire outfit have lost their last four league games, including two home six-pointers against relegation rivals Wigan and Aston Villa, to sit second bottom of the table - above rock-bottom QPR on goal difference.
"Reading Football Club has announced today the departure of manager Brian McDermott," read a statement on the club's official website. "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.
"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 joined Reading as chief scout in September 2000, and went on to become the Under-19s and reserve team manager, before taking over as caretaker boss following the departure of Brendan Rodgers in December 2009.
He became permanent manager at the end of that season, with the highlight of his tenure at the Madjeski Stadium being a remarkable late-season surge that saw the club lift the Championship title last May.