The former Southampton man replaces Brian McDermott, who was sacked on March 11 after a slip in form threatened the Royals' Premier League status.
Adkins himself was removed from his post at St Mary's in January, despite leading the Saints to consecutive promotions from League One.
“I am delighted to bring Nigel to our club because he is perfect for us," owner Anton Zingarevich said. "He has great respect within the game, his CV speaks for itself and he has many attributes as a manager, he is progressive, he develops players, his teams play attacking, passing football but most of all he knows how to win games at all levels.
Zingarevich added, "This is an appointment we have made both with the short and long term in mind and Nigel can take our club forward. I know our supporters have been keen to hear news over the past two weeks and I am certain they will join me in saying it was worth the wait. I wish Nigel and Andy [Crosby] nothing but good luck and now we focus on eight hugely important games in the Premier League.
"Our supporters will also play a vital part in the finale to the season and I am certain Nigel will get an excellent reception from our fans at the Emirates on Saturday."
Gus Poyet had been Reading's first choice to succeed McDermott but the Uruguayan snubbed the offer to move to Berkshire despite talks over a switch from Brighton reaching an advanced stage.
Adkins faces a tough task to keep his new side in the top flight, with the Royals seven points away from safety with just eight games remaining.
His first match in charge will be away to Arsenal on Saturday before a reunion with his former colleagues on April 6 as Southampton travels to Reading for a potentially decisive bottom-of-the-table clash.