First-half goals by James McClean and Steven Fletcher and a late strike by Stephane Sessegnon secured the points as the experienced O'Neill celebrated a year in charge of the club.
Sunderland have jumped to 15th with 16 points from 16 games while Reading are left languishing second from bottom on nine points and remain six points from the safety zone.
"It was important for us to get the first goal. To get it so early on probably settles us down and gets the crowd with us," a delighted O'Neill told Sky Sports.
"We had to do something to raise spirits. That goal was very important. The second goal gives us that extra boost."
Reading manager Brian McDermott added: "It was a tough night for us. We have got numerous problems injury wise. Giving away a goal in the first three minutes doesn't help.
"We've given away a couple of goals and you can't do that in this division. We've got to dig in. We did it last season."
"[Fletcher] hasn't done any training [since being injured], declared himself fit this morning and we're delighted with his goal," said O'Neill. "He has done exceptionally well."
Sunderland's win means Wigan Athletic, who have 15 points, have slipped into the relegation zone while Queens Park Rangers, without a league win this season, are bottom with seven points.
