Chaorman John Madejski was delighted to declare Rodgers as successor to Steve Coppell.
Madejski said: "Brendan is the perfect fit for Reading Football Club.
"He was the outstanding candidate in a very strong field of applicants. He knows the club extremely well, he has worked at the highest level and has every attribute we were looking for in a new manager.
"He started his career here, we have always got on well and had a mutual respect for one another. He furthered his footballing education at Chelsea, one of the biggest clubs in the land, and now he brings that wealth of knowledge back to Reading.
"Brendan is a bright young man with exciting ideas. His managerial credentials, vision for the future and years of experience with our club put him above all others we considered for the job.
"In addition he has a great knowledge of our youth system and will be instrumental in improving the raw talent we already have here. It all combines to make next season an extremely exciting prospect. I wish him great success."
Rodgers said: "I am absolutely overjoyed to be returning to Reading, a club that has always been close to my heart.
"This is a fantastic opportunity and I cannot wait to get started. This is a new cycle for Reading and I am delighted to be the man chosen to lead the club to more success."
Director of football Nick Hammond said: "I am very happy. This has been a wide-ranging process that culminated in a small number of very strong candidates being interviewed by the board, of which Brendan was the outstanding individual.
"I have known Brendan for many years, I have followed his development and am now looking forward to working with him very closely."