Mikele Leigertwood was the hero as his late goal secured Reading's promotion back to the Premier League.
Leigertwood converted an Ian Harte free-kick to send the Royals back into the top flight after four years away.
Brian McDermott's side were not at their best but have now secured 46 points from a possible 51.
Although they were beaten, Forest cannot be relegated from the Championship after Coventry lost at home to Millwall.
Reading were beaten by Swansea in the play-off final last May, but, despite selling striker Shane Long to West Brom and captain Matt Mills to Leicester last summer, they have recovered to win promotion with two games to spare.
They found themselves down in 16th on 1 November after a slow start to the season, but a run of 15 wins in the last 17 games has propelled them up the league.
With owner John Madejski on the brink of selling the club to Russian tycoon Anton Zingarevich's Thames Sports Investment group, the future now looks bright in Berkshire.
McDermott's side now have two games to battle Southampton for the Championship title.
The Saints need two more points to guarantee joining the Royals in the top flight - though West Ham could also still win automatic promotion.
After a scrappy start, Reading had the ball in the net after 19 minutes, only for Jason Roberts' tap-in to be ruled out after Noel Hunt was penalised for a foul on Forest goalkeeper Lee Camp.
Reading keeper Adam Federici then had to save from Adlene Guedioura and Dexter Blackstock, before Royals' substitute Adam Le Fondre saw his chip drift just wide of the post.
The home crowd were lifted with news that promotion rivals West Ham had only drawn with Bristol City, and moments later the winner came when Leigertwood buried from close range after Harte's free-kick was not cleared.
Forest came close to snatching a point and keeping the champagne on ice, but substitute Marcus Tudgay's header was cleared off the line by Alex Pearce with the striker's follow-up effort being kept out by Federici, to put Reading back in the top flight.
The final whistle saw emotional scenes as thousands of fans poured on to the Madejski Stadium pitch to celebrate a return to the top flight.
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