GYLFI Sigurdsson's extra-time cracker denied Albion an FA Cup quarter-final showdown with local rivals Villa.
Robert Koren's two-goal blast appeared to have swept the Baggies into the last eight for the second time in three years.
The Slovenia skipper netted in the sixth and 47th minutes, sandwiching Jimmy Kebe's ninth-minute equaliser.
But there was a dramatic end to normal time when Brian Howard capitalised on sloppy Albion defending to level in the third minute of stoppage time.
And Sigurdsson took Reading into the quarter-finals for the first time in 83 years with a 25-yard beauty in the 95th minute.
Luke Moore, Abdoulaye Meite and Simon Cox all earned recalls, with the cup-tied Frank Nouble and benched duo Jonas Olsson and Chris Brunt making way.
But the biggest news was among the subs, where there were welcome returns from injury for James Morrison and Marek Cech. Morrison was given a real hero's welcome when his name was read out pre-match.
Reading also made three changes as Zurab Khizanishvili, Brynjar Gunnarsson and Jem Karacan were replaced by Jay Tabb, skipper Ivar Ingimarrson and Sigurdsson.
Albion were guilty of conceding after 9.5 seconds in the first game at the Madejski Stadium - but it was the Baggies were drew first blood this time.
The hosts started like a house on fire and Royals keeper Adam Federici had to take evasive action after only 90 seconds when he stuck out a boot to clear Koren's low cross, which had evaded Roman Bednar by inches.
Then, in the fourth minute, Meite will feel he should have done much better with a close-range header from Graham Dorrans' corner, which ballooned over.
Federici was called into action again, this time to block Koren's 12-yard volley, after Matt Mills had only half-cleared a terrific Joe Mattock centre.
But Albion's early endeavour was finally rewarded when they snatched a sixth-minute lead.
Federici did well to push away a 20-yard Bednar grass-cutter before Moore saw his effort from the rebound cleared off the line by Ryan Bertrand.
But Reading didn't get lucky a third time as Koren smashed the loose ball home from six yards.
However, all of Albion's hard work was unravelled in the ninth minute when the visitors levelled.
Simon Church got away from Meite down the left and, from his low centre, Carson did well to keep out Sigurdsson's first-time shot. But that proved a split-second reprieve as Kebe slotted home the rebound.
Reading had a great chance to snatch the lead three minutes later, only for Mills to plant a free header from Sigurdsson's corner well wide.
Back came Albion and Federici was pleased to see Moore's ambitious 25-yard effort bounce just wide of his far post.
Just like in the first game 11 days ago, the entertainment value was sky-high, with the action swinging from end to end.
And Carson had to make an important save on 20 to keep out Jobi McAnuff's fierce 18-yard drive. Gabriel Tamas managed to clear the rebound in the nick of time before Church could pounce.
No quarter was being given anywhere on the pitch and Sigurdsson was the next to try his luck, although he failed to trouble Carson's goal with a 30-yard missile.
After Meite planted a diving header wide from Dorrans' corner, Albion suffered an injury blow in the 39th minute when Bednar hobbled off and was replaced by Chris Wood.
Albion were still on top as the half drew to a close, with Tamas directing a ten-yard header straight at Federici from Dorrans' corner.
The Baggies were back in front within two minutes of the re-start - thanks largely to Federici.
After neat interplay between Gianni Zuiverloon and Youssouf Mulumbu, Koren notched his third goal of the tie when he saw an 18-yard snapshot squirm through the Royals keeper's grasp and over the goalline.
Incredibly, only the woodwork prevented Reading levelling a minute later when Sigurdsson beat Carson all ends up with a 20-yard volley which thundered off the bar. Carson was equal to McAnuff's 18-yard follow-up shot.
The Albion keeper had a nervier moment on 58 when he failed to hold onto Sigurdsson's deflected free-kick but pounced on the loose ball before Mills could stab goalwards.
The Baggies were soon back on the attack and Koren tested Federici again with another long-range-strike, which the Reading keeper pushed away.
But the Royals were fortunate to avoid conceding a penalty after Wood appeared to be pulled back by Bertrand as he tried to get on the end of the rebound.
Albion had a lucky escape of their own when Tamas gifted possession to Kebe. The Royals winger crossed to Sigurdsson whose 12-yard strike was brilliantly blocked by Carson.
Morrison was greeted by a huge roar as he took to the field for the time since last April as a 70th-minute replacement for Dorrans.
The Scotland international was soon in the thick of it, seeing his dangerous right-wing corner headed wide by Tamas.
Former Reading striker Cox almost wrapped the tie up on 76 when he saw a 15-yard volley squirm wide after great build-up play by Moore and Wood.
Koren was desperate for a hat-trick but saw a 20-yard effort fly straight at Federici.
To their credit, Reading kept going until the end and the unsighted Carson showed great reflexes to keep out and then gather Andy Griffin's 20-yard volley after the keeper had punched clear a Howard corner.
But disaster struck in the third minute of stoppage time when Zuiverloon missed his kick from Federici's hopeful punt forward.
The ball broke for Kebe who squared to Howard and the former Barnsley ace stroked the ball past Carson from 12 yards.
That last-gasp equaliser took the tie into extra-time and Cox was the first to threaten when he saw a 25-yard drive dip just wide of the left-hand post.
But it was Reading who took the lead, for the first time on the night, when Sigurdsson capitalised on Meite's poor clearance by curling a delightful 25-yard effort over Carson and into the far top corner in the 95th minute.
Play became patchy as both teams tired and it wasn't until the 105th minute that the next shot at goal arrived, with Cech off target with a 25-yard free-kick.
Albion found their second wind in the second extra period and Koren went agonisingly close when his 20-yard drive deflected off Bertrand and crept just wide of the left-hand post, with Federici beaten.
But try as they might, the Baggies could not summon an equaliser and suffered a disappointing exit from the competition.
The night ended on a sour note for McAnuff who shown a straight red card after the final whistle by referee Lee Mason after squaring up to Mulumbu.
ALBION (4-5-1): Carson; Zuiverloon, Tamas, Meite, Mattock; Koren, Cox, Mulumbu, Dorrans (Morrison 70), Moore (Cech 78); Bednar (Wood 39). Subs not used: Kiely (gk), Slory, Olsson, Brunt.
READING (4-5-1): Federici; Bertrand, Mills (Pearce 72), Ingimarsson, Griffin; Kebe, Tabb (Henry 120+1), Howard, Sigurdsson, McAnuff; Church (Robson-Kanu 103). Subs not used: Hamer (gk), Matejovsky, Rasiak, Thorvaldsson.
GOALS: ALBION - Koren (6, 47). READING - Kebe (9), Howard (90+3), Sigurdsson (95).
BOOKINGS: ALBION - Cech (108). READING - Ingimarsson (foul 60), Tabb (foul 90+1), Kebe (120).
SENDING-OFF: READING - McAnuff (violent conduct FT).
REFEREE: L Mason (Lancashire).
ALBION STARMAN: Robert Koren.