After a third consecutive 0-0 draw for the Hammers and another half hour of extra-time stalemate, new Worthington Cup rules meant no replay, and it was Royals substitute Adrian Viveash who converted the winning spot-kick after Scott Minto had missed his side's seventh attempt.
Another Hammer who will be kicking himself is young striker Jermain Defoe, who was presented with the opportunity to become the night's hero when he stepped up to take West Ham's fifth kick after James Harper's effort had been saved by Shaka Hislop.
However, the England under-21 starlet - who scored twice for his country against Holland on this very ground only last month - saw his kick hit the outside of the post and roll away.
For manager Glenn Roeder, it was yet more frustration after seeing his side once again dominate for long periods but fail to find the vital breakthrough in front of goal.
The Hammers' inability to find the net during the 120 minutes this evening now means they have gone six hours without a goal, and even longer since the last scored in open play, at Middlesbrough on the final day of last season.
The game followed a similar pattern to Saturday's Premiership draw at Derby County, as the Hammers enjoyed the majority of the possession and passed the ball incisively, yet failed to add the killer touch when it mattered.
In the first half of normal time, there was certainly no sign of the drama that would later follow. It was virtually one-way traffic as the Hammers' slick passing movements and pace up front displayed the difference in class and caused the hosts all kind of problems.
Bulgarian striker Svetoslav Todorov - starting in place of the injured Fredi Kanoute - was on the end of most of the Hammers' good early work but couldn't provide the ruthless finishing needed in front of goal.
He curled one effort just the wrong side of the post as early as the second minute and found a yard of space in the box moments later but dithered on the ball and saw the danger cleared.
Defoe, Todorov's strike partner for the evening in the absence of skipper Paolo Di Canio, also looked lively in the opening exchanges and had West Ham's best chance of the first half as he found space in the penalty area and fired in a low shot that Reading keeper Phil Whitehead did well to block with his outstretched foot.
Meanwhile, Reading's sole contribution to the half was a speculative effort from Graeme Murty that caused no problem for Shaka Hislop - returning to the club that gave him his first break in English football.
The Hammers keeper certainly didn't enjoy such a quiet 45 minutes after the break, though, as the hosts finally began to show some attacking prowess and grew in confidence as the score remained level.
Martin Butler had probably the best chance of the game just three minutes after the break when he latched on to a clipped pass over the defence, but Hislop raced off his line to superbly block the striker's effort.
Sammy Igoe and substitute Darius Henderson also went close and the home crowd were sensing that a night of glory could be on the cards after all.
Despite Reading's surge of confidence, the Hammers still looked in control and seemed capable of stepping up a gear as the final stages approached.
Todorov once again went close with a point-blank header that Whitehead saved superbly, while Sinclair and Hutchison both saw long-range efforts fly wide.
Extra-time was an equally close affair and, as gaps and tired legs began to appear all over the pitch, the quest for a winner grew desperate.
As he had done three days earlier at Pride Park, Shaka Hislop once again kept the Hammers in the match with a stunning save late on.
This time he showed razor-sharp reflexes to thwart Readng substitute Darius Henderson in the second period of extra-time, instinctively palming a close-range header over the bar.
In the closing seconds, Sinclair's fierce volley was well saved by Whitehead, before Hutchison headed Carrick's corner over the bar from just four yards out.
That was the last chance of the evening before the dreaded shoot-out reared its ugly head and the rest, as they say, is history.
Manager Glenn Roeder admitted afterwards that his side had once again lacked real firepower up front.
He said: "It's a major disappointment to go out of any cup competition in the first round. There are plenty of chins down in the dressing room because we were one kick away from going through.
"In the opening 20 minutes we looked sharp and Jermain Defoe might have put us ahead but we're finding it hard to score in open play."
The Hammers boss also had words of encouragement for young Defoe, who wasted the chance to secure a third round place when he missed his team's fifth penalty.
"Of all the people it had to be the little fella and he's very down at the moment. He's taken all the responsibility and now he's got to live with it, but he'll come out stronger for it."
Roeder praised hard-working Reading, and also retained an understandable sense of perspective in the wake of the shocking and horrific events in America earlier in the day.
"All credit to Reading, they played tremendously well and they deserve a promotion this season.
It's important to bounce back at Middlesbrough on Saturday - but I don't want to see any moping faces tomorrow.
"To be fair, after what happened in America today, it puts the whole thing in perspective."
www.whufc.com man of the match: Shaka Hislop - Once again came to the rescue of his goal-shy team-mates during normal time and even did his bit in the penalty shoot-out, saving from James Harper. However, his efforts proved to be in vain.
Minute-by-minute:
2 - Todorov collects a pass from Defoe on the halfway-line and runs at the Reading defence before curling a right-foot shot just past the post.
7 - After Todorov has been fouled, Hutchison hits a quick free-kick from 25 yards out that Whitehead tips over for a corner.
9 - Defoe feeds Todorov again but the Bulgarian striker fires his shot well wide.
14 - A succession of quick passes releases Moncur through the middle but the midfielder's stinging shot is palmed away by Whitehead.
16 - Reading's first shot of the match, from full-back Graeme Murty, flies high over Hislop's goal.
17 - Hutchison's threaded pass offers Todorov a shooting chance but the striker is brushed off the ball by a defender in the area.
22 - Another fierce drive from Moncur is handled well by Whitehead.
26 - Defoe's chest down and snap shot on the edge of the penalty area is comfortably gathered by Whitehead.
28 - Sinclair breaks from defence and sets Defoe away with a measured pass. The England under-21 striker cuts into the area and rifles in a low shot that seems destined for the bottom corner until Whitehead sticks out a leg to deflect it away.
33 - Song booked for a foul on Igoe.
35 - Murty skips into the area, cuts inside and fires a weak shot straight into the arms of Hislop.
37 - Defoe has another effort from the edge of the box but fires well wide.
42 - Cureton's dangerous low cross into the area is bravely headed clear by Song.
Added time: 2 minutes.
Half-time: Reading 0 West Ham 0.
Second Half:
46 - Butler's hooked shot from just inside the area drops kindly for Hislop.
48 - Butler is set free on the right by a hopeful knock on but is denied superbly by Hislop, who races off his line to block the shot.
49 - Parkinson races down the left and sends a low cross along the six-yard box that is only partially cleared by Dailly before Minto punts upfield.
61 - Trevor Sinclair's chipped cross is headed over the bar by a Reading defender. From the resulting corner, Todorov sees his point blank header superbly tipped away by Whitehead.
68 - Substitution for Reading, Henderson replaces Cureton.
68 - Just seconds after coming on, Henderson rises to meet a deep cross and heads his effort just inches wide of the far post.
69 - Minto booked for foul on Butler.
72 - Substitution for West Ham, Courtois replaces Moncur.
80 - Carrick's left foot shot is deflected on to the head of Defoe, whose effort isn't strong enough to trouble Whitehead.
84 - Carrick's searching pass finds Trevor Sinclair, who cuts inside and then out again before firing in a low shot that is blocked for a corner.
85 - Substitution for West Ham, Garcia replaces Todorov.
86 - Carrick's 30-yard piledriver is well collected by Whitehead.
90 - Smith's stinging left-foot drive from the edge of the area flies just over the bar.
Added time: 2 minutes
Full-time: Reading 0 West Ham 0.
Extra-time (1st period):
91 - Hutchison lays a square pass to Carrick, whose low right-foot shot skids off the turf and just wide of the post.
94 - After Carrick's corner is only half-cleared, Courtois' goalbound volley from the edge of the box is blocked by the head of a Reading defender.
95 - Substitution for Reading, Viveash replaces Whitbread.
95 - Igoe's cross from the right is headed over the bar by Henderson.
97 - Song meets Carrick's corner at the far post but heads wide of the target.
98 - Henderson comes close again as he meets another Igoe cross and heads just wide.
100 - Substitution for Reading, Rougier replaces Butler.
Added time: 2 minutes.
Extra-time half-time: Reading 0 West Ham 0.
Extra-time (2nd period):
106 - Hutchison receives a pass from Schemmel, turns and hits a dipping volley that just clears the crossbar.
108 - Courtois sets off down the middle and fires in a shot that is deflected towards goal until Whitehead races across to gather.
109 - Sinclair unleashes a fierce shot that Whitehead can only parry out but Defoe's instant volley is saved by the Reading keeper.
111 - Hutchison loses possession in the centre circle and the ball finds Rougier, who runs at Dailly and fires in a shot that Hislop comfortably catches.
112 - Defoe's inch-perfect pass splits the Reading defence and falls perfectly for Sinclair but the stand-in skipper's touch lets him down at the vital moment and the opportunity goes begging.
114 - Murty's deep cross once again finds the head of Henderson but Hislop once again comes to the Hammers' rescue with a stunning point-blank save to keep the ball out.
Added time: 2 minutes.
120 - Carrick's corner drops on the head of Hutchison just four yards out but the Scottish international agonisingly nods over the bar.
Full-time extra-time: Reading 0 West Ham 0.
Penalty Shoot-Out:
WHU1 Don Hutchison
Scores 1-0
REA1 Alex
Smith
Scores 1-1
WHU2 Laurent Courtois Scores
2-1
REA2 Graeme
Murty Scores 2-2
WHU3 Michael Carrick
Scores 3-2
REA3 Anthony Rougier
Scores 3-3
WHU4 Trevor Sinclair
Scores 4-3
REA4 James
Harper
Misses 4-3
WHU5 Jermain
Defoe Misses 4-3
REA5 Sammy
Igoe
Scores 4-4
Sudden Death
WHU6 Christian Dailly
Scores 5-4
REA6 Darius Henderson Scores
5-5
WHU7 Scott
Minto
Misses 5-5
REA7 Adrian
Viveash Scores
5-6
Final result: Reading win 6-5 on penalties.