Reading's reserves lost 3-1 at home to Southampton on Wednesday afternoon and therefore missed out on the chance to secure the Totesport.com Combination title.
Abdulai Baggie was Reading's goalscorer, but the visitors took all three points to derail our title hopes and we need one point from our remaining two games to take top spot.
Graeme Murty started for the Royals and played 45 minutes on his comeback from injury, while Brynjar Gunnarsson got the full 90 minutes in the centre of midfield.
Saints went 1-0 up early on, but Baggie soon levelled soon, only for the visitors to go in front again just before the break.
Reading then hit the bar and had a goal disallowed in search of an equaliser, and Saints got a breakaway third to seal their victory at Madejski Stadium.
Reading: Andersen; Murty (Walcott HT), Spence, Cisse (MacDonald 80), Pearce (c); Gunnarsson, Matejovsky, Taylor, Golbourne; Baggie, White
Subs: McCarthy, O Kelly, Rowe
Coach Nigel Gibbs told readingfc.co.uk, "Overall we worked hard but didn't quite show the guile or quality needed around the box to get the result.
"We didn't get off to the best start and conceded in the first couple of minutes, although we responded well.
"Abdulai made it 1-1 with a good finish, Marek and Scotty Golbourne did well in the build-up.
"We were playing OK but then conceded another poor goal before the break so it was 2-1 at half time.
"We had chances after that, hit the bar and had one disallowed while their 'keeper made some good saves, then they got a breakaway goal that killed it.
"We're very disappointed with the result but we can take a couple of plusses. Murts got 45 and came through fine, Bryn got 90 and Abdulai got himself another goal in his development. A couple of young lads started in Jake Taylor and Andrew White so that was a positive but as I say the result was disappointing for us."