Players were shocked to learn their manager has been sacked on Monday after receiving a message from the club. Mc dermott, 51 led the Royals to promotion just 10 months back.
Reading confirmed on official website saying: "The search for a successor starts immediately. It is hoped a new manager will be in place as soon as possible."
It is understood that former Chelsea manager Roberto Di Matteo and former Swindon manager Paolo Di Canio are likely to replace McDermott. The Royals also confirmed that first-team coach Nigel Gibbs had left the club.
McDermott first joined Reading in 2000 as coach under Alan Pardew and Steve Coppell and was named caretaker manager in 2009 following the sacking of Brendan Rodgers.
Reading won the Championship title last season and earned promotion to the top-flight for the second time in the club's history. The Royals were taken over by Russia tycoon Anton Zaingaverich in May 2012.
But Reading struggled during the first half of the season, winning only two Premier League games. They recovered in 2013 with four successive wins in all competitions.
However, four defeats in a row against Stoke City, Wigan, Everton and the 2-1 loss at home to relegation rivals Aston Villa left Reading 19th in the table, level on points with QPR.