Reading substitute Shane Long fired his side back into the promotion race with a controversial winner as Steve Coppell's side secured their first win in five league matches.
The Royals' bid to go up automatically had hit the buffers in recent weeks after a run of one win and just one goal in their past six in the Coca-Cola Championship.
But Long, a 77th-minute replacement for Noel Hunt, raced onto Stephen Hunt's pass and drilled an angled shot beyond Owls goalkeeper Lee Grant for the winner four minutes later.
The Owls were furious West Midlands referee Andy Hall had waved play on for Michael Duberry's foul during the build-up, but Long kept his cool to hand Reading only their third league win this year.
Wednesday were chasing a third league success on the trot and looked set to add to Reading's woes during a tepid first period thanks to McAllister's breakthrough on the stroke of half-time.
But Reading roared back after the interval and equalised through skipper Kevin Doyle's 18th goal of the season.
Reading scored a bucketful when these two sides last met in September at the Madejski Stadium, hitting the Owls for six without reply, but there was no chance of a repeat as the Owls entered the game full of confidence after wins over Crystal Palace and Burnley.
Wednesday recalled skipper Richard Wood to their starting line-up, with Richard Hinds making way, while Reading also made just the one change as Jay Tabb was preferred to Jimmy Kebe in midfield.
The Owls threatened twice inside the first 10 minutes, but the ball ran away from Leon Clarke in the penalty area and Michael Gray's left-footed free-kick from 20 yards curled inches the wrong side of the post.
Marek Matejovsky then went close to giving the Royals an early lift, bursting into the area and skimming a low shot across Lee Grant's goal and wide.
The visitors were denied a 22nd-minute lead when Stephen Hunt's free-kick, after West Midlands referee Andy Hall had harshly penalised Michael Gray on the right side of the area, beat Grant and came back off the crossbar.
But for the next quarter of an hour there was zero goalmouth action at either end until Reading's Noel Hunt was booked for diving.
But with most in the crowd wondering where a goal would come from and getting ready for their half-time cuppa, Marcus Tudgay played the ball into Clarke in the area and following the big striker's lay-off McAllister planted a neat volley beyond Reading goalkeeper Adam Federici.
Liam Rosenior forced Grant into a superb save shortly after the restart and it was not long before Reading's new-found intent was rewarded.
Matejovsky's corner was flicked on by Noel Hunt and visiting skipper Kevin Doyle headed home his 18th goal of the season to level in the 56th minute.
It was much better fare. Reading sensed their first league win in five matches and Wednesday were in no mood to sit back.
Laws sent on James O'Connor and Wade Small for Darren Potter and Gray with 15 minutes left and Shane Long was sent on for Reading's Noel Hunt soon after.
The Royals substitute slammed home an angled shot from Stephen Hunt's throughball and rubbed salt into Wednesday wounds in the dying seconds when clearing a shot from goalkeeper Grant, who had stormed forward for a corner.
Teams
Sheff Wed Grant, Buxton, Beevers, Wood, Spurr,Johnson (Jeffers 81), McAllister, Potter (O'Connor 77),Gray (Small 76), Tudgay, Clarke.
Subs Not Used: Hinds, Simek.
Booked: Clarke.
Goals: McAllister 45.
Reading Federici, Rosenior, Pearce, Duberry, Armstrong,Tabb (Kebe 46), Gunnarsson (Cisse 90), Matejovsky,Stephen Hunt, Doyle, Noel Hunt (Long 78).
Subs Not Used: Hahnemann, Harper.
Booked: Rosenior, Noel Hunt.
Goals: Doyle 56, Long 81.
Att: 19,268
Ref: Andy Hall (W Midlands).