Frustrated by the Glovers press, the Berkshire outfit were reduced to ten men inside the opening 20 minutes when Sandro Wieser received a straight red for a studs-up challenge.
Already looking dangerous, Town immediately made the most of their numerical advantage as the lively Otis Khan picked out the bottom corner from outside the box.
The hosts’ lead was doubled on 32 minutes when Francois Zoko scored his second in as many matches against the young Reading side.
Against the run of play the Royals grabbed one back through Andrija Novakovich on the stroke of half-time, before substitute Omar Sowunmi scored minutes after coming on after the break.
A Jake Sheppard own goal put the game beyond doubt before Josh Barrett’s last minute penalty acted only as a consolation strike for the visitors.
Darren Way made four changes to the side that started against Crawley Town in Sky Bet League Two just over a week ago, with one change in each department.
Jonny Maddison, Liam Shephard, Matty Dolan and Zoko all came in to the starting XI, with Artur Krysiak (rested), Bevis Mugabi (bench), Tom Eaves (ill) and Jack Storer (bench) replaced.
As in the meeting between the two sides at the Madejski Stadium in the group stages, the Royals enjoyed large spells of possession in the opening exchanges.
However, unable to cause the Town defence any problems, it was the hosts who almost took the lead after 13 minutes.
Dolan and Khan linked up well on the break which allowed the latter to lay off to Ryan Dickson rampaging forward from left-back, but the 30-year-old’s cross could only be headed onto the bar by Zoko at the back post.
With Yeovil’s constricting press irritating the Young Royals, the visitors let frustration get the better of them with 18 minutes on the clock as Sandro Wieser received a straight red card for a studs up challenge on Alex Lawless.
Now with a numerical advantage, Way’s side wasted no time in taking the lead – in fact, just six minutes.
Able to enjoy a bit more space in midfield, Khan cut in from the left wing before curling a sublime effort into the bottom corner from 25 yards to give Stuart Moore no chance.
In a brief foray into the Yeovil half the lively Josh Barrett saw a free-kick tipped over the bar by Maddison, before Town almost doubled their lead on the break.
Dolan and Khan combined well to tee up Dawson inside the box, but the Irishman failed to hit the target with his first-time effort.
But Town weren’t to be denied for long and doubled their lead in classy style just past the half-hour mark.
Ben Whitfield demonstrated good vision to pick out Zoko in the middle, whose first touch classily beat Danzell Gravenberch allowing the 33-year-old to leave Moore standing with a neat finish.
Now rampant, Dawson had a curling effort tipped round the post by Moore before Nathan Smith powered a header against the bar from the resulting corner, as Yeovil looked to put the game to bed.
With half-time fast approaching, Whitfield directed Dawson’s low strike inches wide of the target, before the Royals found an unlikely way back into the match on the stroke of half-time.
Barrett’s wide free-kick ricocheted around the box before falling to Novakovich who stabbed past Maddison from close range, ending a lively half of football at Huish Park.
The frenetic football continued after the break as Whitfield danced past two Reading defenders before having a shot saved by Moore, leading to Barrett forcing a smart save from Maddison at the other end moments later.
As the game ticked towards the hour mark it lost its intensity slightly, not helped by the withdrawal of the lively Khan who limped off to be replaced by Sowunmi.
But the game burst back into life on 65 minutes when – with one of his first touches since taking to the pitch – Sowunmi rose at the back post to head home Dolan’s pinpoint cross.
Keen to utilise their expansive squad the Young Royals made all three of their substitutions in search of a way back into the match, as Yeovil comfortably held their Berkshire opponents at arm’s length.
The Glovers saw off Reading 2-0 in the group stages of the competition at the Madejski Stadium and a second victory against the Royals was confirmed when Whitfield’s cross after a positive run was turned into his own net by Sheppard on 89 minutes.
As the game ticked into stoppage time Reading made the scoreline more respectable thanks to Barrett’s penalty after Matt Butcher brought down Danny Loader in the box, but it wasn’t enough to stop Yeovil storming into the quarter-finals in emphatic style.
Yeovil Town: Maddison; Mugabi, Lacey, Smith, Dickson; Dawson, Lawless (Butcher 45’), Dolan; Khan (Sowunmi 56’), Zoko, Whitfield.
Bookings: Dickson 45’, Dolan 67’, Sowunmi 76’, Shephard 83’, Maddison 90’.
Subs not used: Krysiak, Mugabi, Lea, Bassett, Storer.
Reading Under-23’s: Moore; Sheppard, Gravenberch (Griffin 62’), Hyam, Medford-Smith; Frost, Wieser, Rinomhota; Cardwell (Loader 72’), Barrett, Novakovich (Smith 75’).
Bookings: Wieser (red – 17’), Rinomhota 82’, Barrett 90’.
Subs not used: Bennett, Southwood, East, Howe.