Clement arrived at the Madejski Stadium in late March and successfully steered the Royals away from relegation to the third tier.
However, Reading's struggles have continued in 2018-2019, the announcement coming with the club only sitting outside the bottom three on goal difference.
A run of just two wins in 11 has contributed to that perilous position, prompting Reading to act.
"Owners Mr Yongge Dai and Ms Xiu Li Dai have made the difficult decision that the time is now right to make a change," read a statement on the club's website.
"We would like to thank Paul for his hard work during his time as manager of Reading Football Club and we wish him the very best of luck in his future endeavours.
"CEO Nigel Howe will now seek to swiftly identify and appoint a new manager who will fit the Reading mould, build a team which can deliver performances and results that will help us climb the Championship table and lead the club towards promotion in the future."