Dolan, formerly the head of the academy, was placed in temporary charge following the sacking of Brian McDermott on Monday, while assistant manager Nigel Gibbs also left the club.
Reading's 2-1 defeat by Aston Villa last Saturday was their fourth in a row in the Premier League and left them 19th in the table, with only goal difference keeping them above QPR.
Former Swindon boss Paolo Di Canio, Roberto Di Matteo and Nigel Adkins have all been linked with the job.
With only nine games left to save themselves, time is of the essence for Reading, but they are without a game for a fortnight after Saturday's clash with Manchester United because of international fixtures.
It would be a surprise if owner Anton Zingarevich did not have a new man in place by the time Reading meet Arsenal on March 30 and the Russian has been at the club's Hogwood Park training ground working with director of football Nick Hammond on the recruitment process.
Reading's players have been queuing up to praise McDermott, who had been part of the staff at Reading since 2000.
Captain Jobi McAnuff wrote a tribute to the former manager on the club website and revealed he spoke to McDermott on the phone after his sacking on Monday.
The winger said: "Obviously it was a difficult conversation but he handled himself with great dignity. He wished us all the best for the season, which is a mark of the man.
"He didn't talk about himself or what had happened, he just had the players' and the club's best interests at heart."
Zingarevich addressed the squad on Tuesday and McAnuff stressed the players "fully respect his decision".
McAnuff continued: "Eamonn and I also spoke at length and I would like to wish him the best of luck and emphasise that he has the full support of the players as we concentrate on Saturday's game.
"He is very well known by the boys and has obviously worked wonders in our Academy with so many players coming through to do well, not just here but at lots of other clubs as well.
"All of the young lads speak very highly of him and preparing for Manchester United will not faze him in any way, shape or form. He has been an integral part of the club's success over the past number of years and we will all pull together for him.
"One thing we pride ourselves on here at Reading is unity and Eamonn will no doubt focus on that moving forward together. We have nine games to go and, with our supporters alongside us, we will give it a real shot, starting on Saturday."