The Academy's ten-game unbeaten run was finally ended at the hands of Everton in their first Elite Group fixture.
The Toffees came flying at the blocks and established a 3-1 half time lead, with Uche Ikpeazu's 17th of the season giving the Royals a glimmer of hope.
Our youngsters dominated the second half and made it 3-2 thanks to Jake Cooper, but the Merseysiders survived a tense finally to win the opening Elite Group fixture.
With one eye perhaps on Wednesday's FA Youth Cup tie against Bolton, the young Royals traveled to Liverpool in search of their eleventh successive win.
Having not played a competitive fixture in over a month, the Royals were somewhat slow out of the block and fell behind within ten minutes when Jasper Johns headed home.
Mid-way through the first half, the Toffees doubled their lead. Harry Charsley reacted first to a rebound off the woodwork, and made no mistake from close range.
Although Everton threatened to score a third, the Royals responded well with Ikpeazu scoring his 17th of the season to haul Reading back into the game.
But the Toffees managed to grab a vital goal on the stroke of half time when Charsley headed in from the back post to make it 3-1.
It was all Reading after the break, who dominated possession and fenced the hosts in their own half for much of the second period.
Cooper set up a frantic finale when he scored with just minutes remaining, but despite relentless pressure, the Royals traveled back from Merseyside with nothing to show for their efforts.
Royals: Lincoln; Long, Griffin (Murombedzi 75), Keown, Cooper; Kelly, Stacey, Tshibola (Shaughnessy 83), Fosu; Tanner (Hyam 83), Ikpeazu.
Next up for the Academy is their FA Youth Cup fourth round tie at home to Bolton - why not come and back the boys! Click here.