The 28-year-old, who has also played for Valencia, Liverpool and Juventus, is now free to return to England and the Championship club are open to negotiation.
A Reading statement read: "On deadline day and Tuesday morning the Royals held talks with vastly experienced midfielder Momo Sissoko, and talks with him may continue in the future as he is out of contract."
Sissoko made just 28 appearances for PSG since joining from Juventus in July 2011, and spent the second half of last season on loan with Italian club Fiorentina.
And the Mali international has also been out-of-favour with new coach Laurent Blanc, who took over at the Parc des Princes in June after Carlo Ancelotti left for Real Madrid.
The French club confirmed on their website: "Paris Saint-Germain and
Mohamed Sissoko have agreed to terminate the player's contract with the capital club.
"He is now out of contract and free to sign with another European club."