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The 29-year-old, who has previously played for Aston Villa, has signed a three-year contract with the Royals, keeping him at the club until 2006. Murray will wear the number seven shirt, as he did at Bristol City.
Following last season's remarkable fourth-place finish, followed by Play-Off heart-break, John Madejski hopes his side can go the extra mile and achieve automatic promotion to the promised land of the Premiership.
"This is a very exciting signing and I would like to warmly welcome Scott to the club," said Madejski.
"He is a player we have been pursuing for some time, and I am delighted that his transfer has now been completed.
"Scott is an important part of our plans to push for promotion to the Premiership in the coming season."
The Royals were required only to pay £400,000 up front for Murray's services, the further £150,000 will arrive in the Robins bank account if the Royals, and Murray, perform well on the field.
The fee is remarkably low given that Bristol City had originally refused to accept an offer below £1 million.
Now that Reading have completed their first summer signing they will hope to tie up deals to bring further players to the club before the start of the season. The likes of Richie Partridge, Danny Cullip, Paul Devlin and David Connolly could sign for the Royals shortly.
The number seven shirt, which Murray will wear, has been freed up as Trinidad & Tobagan international Anthony Rougier was this summer released by the Royals.
With Sammy Igoe, Glen Little and Luke Chadwick no longer at the club, Murray should have no problem making the right-wing spot his own.
In recent weeks, as the transfer drew ever closer, the 29-year-old has been hyped up and further hyped up. Reading MAD can confirm that he is not the second coming of Christ, but do know that he is a very good player whose goals could, quite conceivably, be the difference between promotion and another year in Division One.