The 21-year-old has signed a three-and-a-half-year contract with Reading.
He told the Reading website: “I am absolutely delighted, it is a massive club.
“I am really excited about the opportunity and look forward to getting going.
“I had time on loan at Walsall which was a fantastic experienced for me and I then had a few opportunities for a permanent move and, as soon as I heard Reading were interested, it was an option I really wanted to take.
“It is a massive club. Great manager, great stadium.”
Evans came through the academy at City and made his first-team debut for the club in the Captial One Cup win at Sunderland in September.
Royals manager Brian McDermott said: “I am delighted we have secured the signing of George.
“I saw him play for Walsall while I was scouting for Arsenal and we’ve followed him ever since.
“He is a great guy and a terrific young midfielder with great pedigree, and I’m sure he will become an even better player working in our environment at Reading.”
Chief executive Nigel Howe added: “I’m delighted George has decided to join Reading.
“He is a very promising young footballer who, with an excellent footballing education behind him and first team experience already under his belt, perfectly fits this football club.”