In-form strikers Danny Ings and Sam Vokes did the damage once more.
Ings struck in the first half, his seventh league goal of the season, before Vokes doubled the hosts' advantage with his fifth in four Championship games late on.
Jason Shackell's own goal with eight minutes remaining set nerves jangling at Turf Moor, but the Clarets held on to earn their fifth league win in a row which represents their best start to a season since 1961 - when they finished runners-up in the top flight.
"I thought we were absolutely excellent," said Dyche. "We created many chances and we looked solid and their keeper had to be on form.
"We are still a work in progress but we went into the game with a good focus and we produced a really good performance.
"We showed we can compete against everyone and we are in a magnificent position to do that in every game we play.
"This was up there with our best performances of the season and we are on a roll, but it doesn't guarantee you anything.
"Reading have very good players, but we shifted the ball well, kept it well, our framework was good and all the things you look for as a manager were delivered.
"They scored a goal out of nothing, but we closed the game out in a professional way and the players gave maximum effort. The back four were nice and solid and we had a great ethic."
Ings celebrated his midweek call-up to the England Under-21 squad by netting the opener after 21 minutes from Kieran Trippier's seemingly innocuous ball.
Wales international Vokes then doubled the advantage with 10 minutes remaining from a narrow angle before Shackell's unfortunate own goal two minutes later.
"We have to give credit to Burnley because they sit top of the league and they were very good again in this one," said Reading boss Nigel Adkins, whose Royals side fell to their first defeat in seven games.
"We would like to think we can avoid the types of goals they scored, but we made three substitutions after an hour and changed our shape totally in an effort to control the game better.
"It was only 1-0 at the time and we endeavoured to get something from it, but Burnley worked very, very hard and I thought their front two were exceptional throughout.
"They worked very hard, but I am disappointed not to have got three points because that is what we came here for.
"I thought we could have done better but when you come away from home and give teams an opportunity it obviously lifts their players.
"The place was rocking at times and Burnley put in some fantastic work."