The 23-year-old has played 23 games for the Royals, while also having loan spells at Aldershot, Exeter, Cheltenham, Crawley and Leyton Orient.
Taylor has represented Wales at senior level, making his debut against Cyprus last October.
He will wear the No 25 shirt and go straight into the squad for Wednesday’s game against Hearts, subject to clearance.
Taylor told the Scottish Premiership club’s website: “I’ve had a good pre-season down at Reading, played a few games and I feel fit and ready to go.
“I am coming to Motherwell with the aim of getting as much game time as possible and to help the team. I’m 23 now and it’s important that I am getting as much first-team football as I can.
“I’ve spoken to ex-Motherwell players Nick Blackman and Tom Hateley, and both had nothing but good things to say about the club and Scottish football and that certainly helped make my mind up about joining.”