Reading arrived at Kingsmeadow needing a win to qualify for the knockout stage of the Continental Cup.
They drew 1-1 in 90 minutes and a 4-2 win on penalties saw the Royals get their first win against the Blues in their last ten meetings.
Chelsea go top of Group D taking a point from this match, making them the hosts for their quarter-final match.
Striker Bethany England missed her penalty and Reading’s star player, Rachel Laws, saved Chelsea’s fifth penalty to take her team onto the next round.
Laws was a crucial player to keep Reading’s hopes of winning alive, constantly making outstanding saves denying Chelsea’s brilliant attack from scoring more in regulation time.
Reading got a lead early in the first half from a freekick by Jo Potter on the edge of the box that was hit perfectly around the wall and into the right lower corner of Carly Telford’s goal.
Chelsea were uncharacteristically scrappy until the 66th minute when Deanna Cooper equalised the score with a long-range strike.
Emma Hayes, Chelsea manager, did not hide her disappointment of the performance but was still happy about other key details.
“You have to have context. We’re going out as group winners and we’re going to be at home in the next round which is what you really want as group winners so I’m happy about that.
“The game has given me exactly what I wanted but we took far too long to get going. We played into their hands for much of the first half and when you make changes there’s going to be adaption in all that,” Hayes added.
“It’s their cup final when they play us, it’s their big game so they always perform well. Credit to them, they made it difficult. They got around us and they made it hard for us to settle in position.
“I rather have what I have tonight and learned what I learned tonight than face that in January.”
Chelsea’s goal scorer, Cooper, did not feel much different.
“It was a tough game. Reading are a quite difficult side and they make it hard for you. It was quite scrappy but again we went behind, and we still managed to put it back.
“Which is kind of a thing for us. We like to go behind and make it tough for us, but we always manage to put it back,” Cooper added.
“It shows a lot about our character as a team. There were a lot of changes today so it’s good to see everyone having that characteristic and fight to want to get back into the game.”