McDermott's side arrived at London Road having won nine of their previous 10 matches and hit the front through Noel Hunt, but goals from George Boyd, Tyrone Barnett and Paul Taylor earned the hosts the points.
Reading remain in second spot despite the setback and McDermott said: "I can't fault the lads in the slightest.
"We've been on a terrific run to get ourselves into a great position and nothing has changed. We were 20 points off the pace at one point so the players deserve great credit for what they have done.
"We didn't have the best of nights, but we'll certainly bounce back and I don't want to take anything away from Peterborough who played very well.
"We knew all about their strength at set-plays and they have some very dangerous strikers."