A goal by Reading's George Pușcaș just before half-time dented the hosts' ambitions but they were far from outclassed in the opening 45 minutes.
Harriers' captain and longest-serving player Sam Austin made their hard work after the interval count with an equaliser on 69 minutes.
Reading had looked there for the taking, having suffered several injuries over the course of the game, but it was still a shock when Amari Morgan-Smith fired home what would prove to be the winner with less than 10 minutes to go.
It means a memorable FA Cup journey for Kidderminster of the National League North goes on - they had already knocked out Grimsby and Halifax on their way to the sell-out showdown with Reading at Aggborough.
As the lowest ranked team in the hat for the third round, the Reds were unquestionably the underdogs and they lined up against players with Premier League and European experience including Pușcaș, Danny Drinkwater and Alen Halilović.
They might not have been watched by the nation at large (the match was not chosen for live broadcast by TV companies meaning the hosts missed out on a £85,000 windfall), but Russ Penn's men were still determined to give their fans a good show.
That said, the BBC did broadcast a special edition of their Football Focus programme from Aggborough before kick-off, with fans giving presenter Alex Scott a warm and raucous welcome. The pre-match atmosphere suited the occasion, with the fan zone buzzing right up to kick-off and the stadium a sell-out.
Penn, who has been in charge since April of 2020, has previously spoken of the unexpected benefits brought by the Covid-19 pandemic - he said the enforced break gave the club a chance to 'press the reset button' after a period of turmoil.
Almost two years on the Harriers are soaring, unbeaten in eight in the National League North and pushing for promotion while breaking new ground in an unlikely FA Cup campaign.
Now their fans can carry on dreaming as they fly into the round of 16.
The FA Cup fourth round draw will take place this Sunday, January 9. It is scheduled to start at 4.50pm.