More than 18 months of anticipation turned to shock and disappointment when the civic honour was awarded to Chelmsford in Essex, Perth in Scotland and St Asaph in Wales.
Hundreds logged on to social network websites to express their disbelief, with many having never heard of the winning towns.
Steven Wicks, 37, from Caversham, said: "I am very surprised because Reading definitely deserves to be a city. I thought we had it."
Christine McCluskey, 58, from Tilehurst, said: "I can't believe it. Chelmsford? Essex, really? I'm very disappointed."
A Chronicle reader added: "Such a shame - St where? I thought it would be third time lucky!"
Reading was one of 25 towns competing for city status to mark the Queen's Diamond Jubilee and officials were queuing up to voice their disappointment.
Mary Bayliss, the Lord Lieutenant of Berkshire, added: "I thought Reading had a really good chance and is so worthy of being a city because it is such an important place. I'm very disappointed."
Rev Vernon Orr, the vicar of St Agnes' Church in Whitley, said: "I was shocked, that was my first reaction. However, city status is about how others see us and I think what is important for Reading is how we see ourselves. I see Reading as a significant town that is on the verge of even greater influence in our country and the world. We have a destiny that will be fulfilled regardless of whatever "status" others may grant us."
But not everyone in the town was upset. Reading Green Party Rob White said: "Jobs in the local economy are a priority for the Green Party. We were never convinced of the benefits of city status and we wont be shedding any tears. We would rather see Reading as a great town than a league two city."
The last civic honours competition was held in 2002 to mark the Golden Jubilee when Preston, Stirling, Newport, Lisburn and Newry were awarded city status and Exeter was awarded a Lord Mayoralty.
For more reaction pick up the Reading Chronicle tomorrow.