The 25-year-old completed his medical on Friday and will formally complete the move on Sunday.
Royals chairman Sir John Madejski: "I would like to welcome Danny to Reading and wish him every success here."
Guthrie suffered early in the campaign last season following a pre-season knee injury and took his time to get back into the squad.
Then the arrival of Cheick Tiote put him down the pecking order, and the former Liverpool winger made it known he would be leaving in the summer.
Danny Guthrie: "It feels brilliant to have signed, it is a great honour and I am very excited.
"As soon as I met the manager and Nick Hammond my mind was made up, it was a no-brainer.
"Reading Football Club is a fantastic family club, well run and I'm so excited to be part of something special for this club."
Director of football Nick Hammond: "Danny is a player we have admired for a long time and we have been aware of him since he first broke into the Premier League at Bolton.
"He has great experience at this level, most recently for a massive club in Newcastle playing in front of big crowds on a regular basis.
"He is a good age, but still has a lot more to come with the best years of his career ahead of him."
Manager Brian McDermott: "We're delighted Danny has signed for us.
"He brings good experience at a good age, he has real ability to pass the ball, he's got energy and he is what Reading is all about, a hungry player.
"We're looking to add players who we think will be good for us over a number of years, not just next season, adding to the players who have already done fantastically well for us."
Guthrie has had an 'interesting' summer ...
Oh dear ... it's supposed to be the happiest day of a bride's life. But Danny Guthrie's wedding went 'arse over tit!'
Police were twice called to the wedding which descended into chaos after a brawl in a marquee in the grounds of a Yorkshire stately home.
Trouble broke out at the wedding reception of Guthrie, 25, and his Liverpudlian girlfriend Rebecca Middleman, mother of their three-year-old daughter Sienna, at Allerton Castle, near Harrogate.
Shocked staff twice called in police and officers are also investigating a complaint made by a woman caught up in a further disturbance on a bus which left the venue in the early hours.
Sources said violence had erupted in a marquee on the lakeside of the stately home and the 23-year-old bride is reported to have been hit in the face during the melee and had to go to hospital for checks the next morning.
The trouble, in the early hours of June 2, was quelled by police but then at 4am – after staff at the Castle had locked the guests out – police were called again when one kicked against the door to apparently try to gain entry.
One source said things had looked like getting out of hand during the wedding feast, prepared by Michelin-starred caterers Dine, held in the marquee at a reputed cost of £40,000. “They were chucking the lobster thermadore about. How can you comprehend such behaviour?”
Yesterday, John and Jan Cook, managers at Allerton Castle, which is run by the Rolphe Foundation, a charitable trust, confirmed the police were called to two disturbances but said they could not comment further. But a source close to the venue said everyone had been left “shocked and disgusted”.
”Thankfully, they were well away from the Castle itself,” they added. “The Foundation has spent untold thousands in renovation, the damage could have been enormous.
“Mr and Mrs Cook, who live on site, were called by marquee staff at 2am to say there was trouble, and the police had been called, and not to expect anyone staying for the night. Mr Cook gave it until 3.30am then locked the doors. At 4am they were awoken by the sound of someone breaking in. The police were called again, by the Cooks.”
The source added there had so far been no apology for what had happened.
Yesterday, North Yorkshire Police said that in all they had been called three times to incidents connected with the wedding – twice on the morning of June 2 and on June 3 following an incident on a coach taking guests home.
A spokeswoman said: “North Yorkshire Police were called at 2.25am on the morning of June 2 to reports of a fight among a group of guests at Allerton Castle, Allerton Park near Knaresborough. On arrival, the guests were dispersing and leaving the venue and no complaints were received from any victims. No arrests were made.
“Police received a further call at 4.50am when a group of people began banging on doors and causing a disturbance. On arrival, police found a number of guests had been locked out and were trying to get back in. No crimes were reported and no arrests were made.
“Police received another call on June 3 from a woman who reported being caught up in a disturbance on a bus which was about to leave the same venue in the early hours of June 2. This incident is currently under investigation.”
Guthrie yesterday took to Twitter in an apparent attempt to play down the events and said: “its (sic) been made to look a whole lot worse. gossip gossip gossip”.
Families of both the bride and bridegroom have denied reports of brawling but online forums yesterday were busy with reports from people claiming to have been present when the violence broke out.
Rebecca Guthrie declined to comment last night, while in Telford, the footballer’s mother Jackie Guthrie said: “I’m shocked. I don’t know what you’re talking about. There was no punch up. There was no fight. What do you mean someone mouthed off? No way. It was a clean cut wedding and nothing happened.”