The 25-year-old former Portugal Under-21 international, who can operate either in defence or midfield, joined La Liga side Sevilla on a season-long loan deal last July and played his part in their Europa League triumph.
Championship outfit Reading have now confirmed that Sevilla have opted to sign the former Sporting Lisbon man on a permanent basis.
Reading director of football Nick Hammond told the club's official website: "We would like to wish Daniel all the very best. It's a good deal for him and for Reading Football Club.
"He joined us last year at a difficult time for the team and when he was not up to full match fitness, but has gone to Spanish football, which has been a great fit for him, and has done exceptionally well.
"He's a fantastic individual, and we wish him all the best at Sevilla."
Carrico made just one start and two substitute appearances for Reading during his short time at the club, which began in January 2013.
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