The Royals had the midfielder, who had refused to sign a new contract at City, watched on Saturday and have now signed him until June 2011.
It was known that Tabb had decided in the summer that he felt his career lay nearer his London based family and whatever City offered Tabb, who was the unanimous player of the season last term, he was not going to sign a new contract.
Said Ray Ranson to the Club website: "Chris and I spoke to Jay in the summer during pre-season and told him we would sit down and talk about a new contract once the season started.
"The next time we spoke to him he said he did not want to sign and that he would prefer to keep his options open until the end of the season. "In turn, that left us with no other option other than seriously considering offers for Jay as there were a few clubs interested in him.
"If we had not been offered appropriate terms by another club, then the deal wouldn't have happened. "But, considering the fact that we are well over halfway through the season, this offer was too good to turn down for the club
"I would like to take this opportunity to thank Jay because he has been a credit to himself and the football club during his time here."
Covsupport News Service also wish him well.
Reading boss Steve Coppell said to his club's website: "He is a player I know well, and I am certain he will supplement our squad as we go into this final third of the season.
Tabb made 91 starts (plus eight sub appearances for City and scored eleven goals.
Pictures of Jay Tabb signing for Reading can be seen here