The 26-year-old came to an agreement with the League One club to mutually end his deal ahead of the January transfer window.
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Ejaria has not played this season due to injury problems and managed just eight league games last term.
His contract was set to end this summer but it has been “amicably” terminated early.
Reading have been keen to reduce expenditure and they will now save money on his wages.
Ejaria was tipped for big things as a youngster and was on the books of both Arsenal and Liverpool.
He made eight senior appearances for the Reds and his debut came in 2016.
The midfielder was subsequently loaned out to Sunderland, Rangers and Reading.
He then moved to the Royals permanently for £3.5million in 2020.
Ejaria also earned one cap for England‘s Under-21s back when he was dubbed a wonderkid.
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And he was part of a star-studded Under-20s squad that won the World Cup in 2017, which featured the likes of Dominic Solanke, Fikayo Tomori, Ademola Lookman and Dominic Calvert-Lewin.
Reading are currently 23rd in League One and are in the midst of a relegation battle.