Birmingham can be relieved to have won their second replay of the season but their display lacked conviction despite goals from Mikael Forssell and Gray.
In view of the importance of the game the surprising feature was the fact both teams were very much under-strength. Birmingham have been badly hit by injuries and had no alternative but Reading, as they did in the previous round at West Brom, put out very much a second string side.
The result was that it turned out to be a very evenly-contested game in the early stages and Reading wasted a golden opportunity to go ahead in the fifth minute.
Dave Kitson ghosted past Alex Bruce but, with only Maik Taylor to beat, the Reading striker guided his shot just wide of the far upright.
It was a definite let-off for Birmingham and they responded with some attractive attacking moves which generally involved the skilful Jamaine Pennant.
But it was Reading who slowly became the more dominant as the likes of Brynjar Gunnarsson took control of the midfield.
Jamie Clapham and Stephan Clemence were unable to stamp their mark on the game and as a result Birmingham's attack struggled to make any impact.
But in the 29th minute Birmingham took the lead as a result of some determined play by Forssell. Pennant put the Finn in possession but it appeared a lost cause as Forssell's path was blocked by four Reading defenders.
However, the ball bobbled its way through and the Birmingham striker eventually stabbed his shot into an empty net.
Reading replied in a positive fashion in the next minute when Steve Sidwell shot against the post. From the rebound Kitson hammered in a powerful drive only to see Taylor make a commendable save.
Ominously Reading continued to be the more threatening side as the game progressed and Birmingham's weakness down the middle of their defence became a growing problem.
This was highlighted at the start of the second half when Steve Hunt deservedly equalised for Reading. The Irishman collected a throughball and outwitted both Bruce and Mario Melchiot before hammering a left-foot shot into the net off the underside of the crossbar.
The limitations of Birmingham's youngsters were exposed and the Premiership club increasingly relied upon the skill and pace of Pennant to put pressure on Reading.
Ibrahima Sonko, highly-rated by Birmingham boss Steve Bruce, emerged as the cornerstone of the Reading defence as the game became a grim tussle.
Chances were missed by both teams with Gray wasting a glorious chance for Birmingham but the former Crystal Palace utility man atoned when he scored the winner with a neat 67th minute header from Jiri Jarosik's right-wing cross.