The Royals Academy is one of only six outside the Barclays Premier League to receive the Category One seal of approval.
A club statement read: "When the new Elite Player Performance Plan was announced, the club made the strategic decision to invest a huge amount of time and effort in ensuring we gained the best possible grading and it is credit to all concerned that we are now a Category One club.
"From day one, owner Anton Zingarevich has placed huge emphasis on our youth set-up, and this categorisation gives us the best chance of maintaining and building upon the fantastic successes from within our youth set-up.
"Congratulations must go to every person who has made his happen, each devoting an extraordinary amount of time and effort and working incredibly hard to achieve this ultimate goal."
The likes of Jem Karacan, Alex Pearce, Simon Church, Gylfi Sigurdsson, Simon Cox, Hal Robson-Kanu and Alex McCarthy have all progressed through the club's Academy to the first team in recent seasons.