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They extended their lead in the 51st minute when Gretna defender Sean Webb side-footed home from a corner.
However, the Republic hit back with two penalties from Reading striker Kevin Doyle. The first was awarded after Mark McCrystal had brought down Jay Tabb and Doyle forced the kick home after a rebound, the second was awarded in the 72nd minute after Tabb was again fouled and this time Doyle scored directly from the penalty spot.
Republic of Ireland U21: Henderson (Aston Villa); Foley (Luton Town), Kelly (Tottenham Hotspur), Fitzgerald (Bury), Sheehan (Leicester City); Cregg (Arsenal), Whelan (Sheffield Wednesday), O’Brien (Bolton Wanderers), Tabb (Brentford); Murphy (Sunderland), Doyle (Reading).