The former Republic of Ireland international, who spent time at Millwall, Blackburn Rovers and West Brom during his playing career, has linked up with Roy Hodgson again, having previously worked with him in the Midlands during his time as Baggies boss.
"It's been fantastic. I was delighted to get the call to join such a great club and great fans," Reid told eagles.cpfc.co.uk.
"I have played a few games here as an opposition player and I know how passionate the fans are, so to get the opportunity to work with firstly Roy Hodgson and Ray Lewington, and the club, was a great honour for me.
"I worked with Roy at West Brom before he got the England job and I know the way he works and I have got huge respect for him as a manager and as a person.
"It was an offer that I quickly ripped their arm off and I am delighted to be here."
He added: "I have spent the majority of my career based in Manchester and moved back down south a couple of years ago when I got the Reading job.