The Peruvian international has agreed a three-year deal subject to the player receiving international clearance.
Royals boss Steve Clarke said: “Paolo Hurtado is a player that we have been following since January.
“He is a creative player who can play off either side of the pitch. As well as creating chances for others, Paolo also has an eye for a goal.
“His style of play should complement the players already here and we look forward to Paolo joining our squad.”