We had this discussion some months ago in solomusic.net/forum.
This was my previous reply.
I find that 'Improve your sight reading' by Paul Harris to be most helpful for a progressive study, and Hal Leonard's notespeller is excellent for kids and benefecial for adult beginners likewise.
There are certain things one can do ( specially recommended for people with poor co-ordination or slow note reading. )
1. U can memorise some space or line formulas as guidelines to help u read, and it's easy to navigate around em.
Treble(space notes)_ FACE
Treble(line notes)_ Every Good Boy Does Fine
Bass ( space notes )_ACE is Good, or, All Cows Eat Grass
Bass ( line notes )_ Good Boy Does Fine Again.
2. After u've got that in your head, you learn to navigate around the staves with that. U do written ex. of note spellers, then gradually leading into verbal exercise...as the main difference between written and spoken form lies in the speed.
3. Then, do Hal Leonard's advanced notespeller whereby they make u learn to read notes in shapes and intervals...this is esp. helpful for chordal playing. And they make u recognise different intervals such as steps(2nd), thirds( leaps), fourths and fifths and so on.
4. Try Paul Harris's clapping ex. The purpose of doing clapping is not to check the rhythm, but to work on the co-ordination between the 2 hands. So often have I seen teachers making students do these clapping ex in two seperate lines, which is really wrong. Let the kid clap the 2 lines at once, so it'll be pretty mucgh like playing on the piano itself. Right hand for the upper line, and left for the lower line. Start with really simple rhythm, then progressing into dotted rhythm, triplets and so on.
5. Now, here is when the actual playing comes in...after the student is equipped with adaquete note reading abilities-Pls note that the student does not have to read every note itself, most often, they are encouraged to read in steps and shapes, to ensure a good flow.
Start with real simple ex that anchors around the key note and moves in steps, then progress to leaps of thirds, then 5ths.
4th will come in by itself, so long as they can tell the difference between 3rds and 5ths. And methods as such work not only for chords, but for melodic progression also.
Both hands always seems more tricky. But it'll be tackable if it's done systematically. Start simple BH ex with 'false' BH playing. RH doing steps and leaps, and LH with tied notes, or occasional 'shapes'...preferably 5ths. Then take it to the next step, LH in steps, and RH with shapes....and so on.
And the ultimate element, is the ability to read ahead. Choose spaced out rhythm such as minims for a head start, and perhaps chords...since shapes are easier to identify. So, it'll go like this: 0 read, 1 play, 2 read, 3 play, 4 read the next bar, 1 play... and so on.
Then, finally it'll develop into something like this... 0 read, 1 play, 234 read, 3 play... This means that they'll actually read 1 whole bar/phrase ahead.
And lastly, always remember that chordal progresisons are always easier to sight read, it's the linear ones that are difficult.
And ... do equip yoursself with a good sense of key. Knowing that a piece is in a certain key and sight playing it rather than knowing/reminding yourself all the possible accidentals along the way makes a great difference to the flow.