A HIGHLY INCOMPLETE CATHOLIC READING LIST
Even so great a bibliophile as myself cannot possibly read all of the great Catholic books out there.  So I am warning you right now that there are many, many, MANY excellent books out there that are not on this list for the simple reason that I have not gotten around to them yet! If you know of a book so great that no Catholic should live without reading it, by all means email me and tell me about it.  Categories are arranged alphabeticially, but otherwise there's little order.
APOLOGETICS
CATHOLICISM AND FUNDAMENTALISM, by Karl Keating.  If you know Karl Keating from Catholic Answers, you'll know what to expect from this book.  It's written in answer to some common accusations leveled against the Catholic Church: accusations that Catholics worship Mary, that the Catholic Church is unChristian, etc.  In answering these charges, Keating gives a good grounding in the reasons for many Catholic claims.  Word of Warning:  Keating is talking about a group of anti-Catholics which is very small. Though many non-Catholics misunderstand the Catholic Church, very very few are as persistant in their attacks as the people Keating is refuting here.

FUNDAMENTALS OF THE FAITH, by Peter Kreeft.  I had trouble placing this book: it COULD just as easily have gone under "Theology."  Kreeft explains Christianity, starting with the existence of God, moving into the divinity of Christ, and finishing with information about specifically Catholic issues.  This is a good book for someone who's background in Christianity is not strong. It's also a good book for cradle Catholics who want an explanation of why it's reasonable to be Catholic!  I highly recommend this book to anyone with the slightest interest in religion.

FAITH OF OUR FATHERS, by James Cardinal Gibbons.  About a hundred years ago, Cardinal Gibbons wrote this book for his fellow Christians, to explain the Catholic Church to those who did not understand it.  Today it is still one of the best explanations of the Catholic Church.   It is as useful to Catholics with an uncertain knowledge of apologetics as it is to curious non-Catholics.

THE SALVATION CONTROVERSY
by James Akin. This is the best work on the issue of salvation and justification that I've read. Akin leads the reader through a very scriptural description of the ways salvation and justification appear in the Bible, and shows how the Catholic view agrees with the Biblical teaching.  This is highly recommended for anyone who has ever gotten into a debate about justification, whether one argues from the Catholic side or against it, because this book does a very good job of showing what Catholicism really says about justification and why.
CONVERSION STORIES
ROME SWEET HOME, by Scott and Kimberly Hahn.  The Hahns are an amazing Catholic couple.  This is the story of their journey to Catholicism. If you read only one "convert story" read this one, because in telling their story, the Hahns shed a great deal of light on issues like birth control, sola scriptura and sola fide, authority, and Marian devotion.  If you're interested in their story but don't have the time or the inclination to read it, no problem: go to Catholicity's Mary Foundation and look for their free tapes!

SURPRISED BY TRUTH, edited by Patrick Madrid.  This is a collection of short conversion stories.  Each of the authors has a somewhat different angle on the Church, so the book makes for interesting reading.  If you've ever wondered if there's a reason to be Catholic aside from just being born that way, read this book!

BORN FUNDAMENTALIST, BORN AGAIN CATHOLIC
, by David Currie.  Besides having a catching title, this book is interesting in that Currie goes a little more deeply into the theological reasons behind his conversion that some authors do.
CHRISTIAN LIVING/ DEVOTIONAL
LIFT UP YOUR HEARTS, by Fulton Sheen.  Archbishop Sheen was one of the great American Catholics of this century, and this is an excellent book, though in my case it sometimes hit uncomfortably close to home! It's all about having a God-centered outlook, and a God-centered life, rather than having a personality centered around oneself.

INTRODUCTION TO THE DEVOUT LIFE, by St. Francis de Sales.  This is a classic devotional work written specifically for the normal Catholic layman who wants to get serious about God.  It's practical advice about how to make devotion the center of one's life.  De Sales leads you through the process of mental prayer, gives advice on the use of the sacrament of confession, and offers advice on finding out one's vices so that one can combat them by putting the seven virtues into action.
THE IMITATION OF CHRIST, by St. Thomas A Kempis.  Another classic devotional work, popular for good reason.  This is an excellent book to keep around for reading bits and snatches when you need a spiritual boost.  Those of us who have a problem with pride find this book humbling; those who love the Eucharist will find the last section of the book particularly good. Click here to get to the online version.

NO GREATER LOVE, by Mother Teresa.  This is Mother Teresa in her own words, and it's absolutely amazing.  It's a collection of sayings on subjects such as Prayer, Jesus, Suffering and Death, and so on.  You'll want to read this, not just because it's full of great quotes, not just because of stories of people who have nothing but who are somehow full of joy, not just because it will help you realize what's really important, but also because it's a look into the mind of one of the twentieth centuries great saints.  (No, she has not been canonized yet, but skim through this book and you'll agree that she's with Christ.)

SECRET OF THE ROSARY, by St. Louis De Montefort.  In this work, Montefort tells us why we should pray the rosary, how we can pray it better, and gives a number of miraculous stories about the Rosary.  This is an old book, and it is written in an older style, but it is not difficult to read.
LITERATURE
G.K CHESTERTON
Yes, I have a bias for GKC; really he deserves his own page.  As a matter of fact, there are a number of GKC webpages, and quite a few of his works (including whole books) are online. The
Chesterton Megalinks page is a good place to start looking! Chesterton is a writer for those who love words and who have a sense of humor.  Here's a guide to some of his fiction:

THE MAN WHO WAS THURSDAY.  Like most of his novels, this one is both profound and absolutely hilarious.  I can't tell you what it's about, because that would give away the twist.  I can tell you that it's a long and hilarious chase after the most frightening thing in the world.  I'm thinking this is his best work of fiction, but others may disagree.

THE BALL AND THE CROSS.  This is about the duel between a "devout and naive Catholic and a devout and naive Atheist."  It isn't surprising, then, that this book examines a lot of religious issues.  And since it is by Chesterton, it isn't surprising that it's also quite funny. Warning: this book does contain a lot of "flowery" passages describing sunsets and so on.  If you don't like such description, read at your peril.

MANALIVE.  Finally back in print, thanks to Dover. This book is also online.  If you've ever thought that being good is dull, read this book.  Innocent Smith is virtue set in motion; not a don't-do-this virtue, but a take-life-to-the-fullest-and-share-it-with-the-world virtue.  A good book for anyone who needs to wake up.

C.S. LEWIS
No, he wasn't Catholic, but he wrote some excellent works.  Some of them are hard to place: is
The Great Divorce fiction or an allegory?  I've decided to lump anything remotely fictional here.

THE SPACE TRILOGY:  OUT OF THE SILENT PLANET, PERELANDRA, and THAT HIDEOUS STRENGTH. Ever wondered about the theological significance of aliens?  Read this trilogy!  In addition to telling a good story, Lewis finds time to shed light on all sorts of issues about God and morality.

THE SCREWTAPE LETTERS.  Proof that Lewis wasn't as stodgy as he sometimes seems. This book is a series of letters from a demon to his pupil, advising him on the ways of corrupting human beings.  Reading it will (hopefully!) help us mortals to avoid these traps. 

THE GREAT DIVORCE.  Lewis's vision of Heaven and Hell.  Don't take this for a work of theology, because it doesn't entirely mesh with Catholic teaching; instead, take for it the insightful study of human nature (and the way we damn ourselves) that it is. 

GRAHAM GREENE
If you could imagine a cross between Hemingway and Chesterton, you might come up with someone like Graham Greene. He was another of those English converts, but he had a fondness for Spain and Latin America.  I haven't read very much by him yet, but he seems an author worth exploring.

MONSIGNOR QUIXOTE.  Monsignor Quixote is a naive and whimsical Spanish priest whose best friend just happens to be the local Communist; they take off on a road trip into idealism (for they are both idealists) and, at the end, find something like revelation.

THE POWER AND THE GLORY.  This is the story of a hunted priest in Mexico. I warn you, I was bored through much of this book, but the ending was worth it.  It is, however, quite serious reading.

THE END OF THE AFFAIR.  This is a marvelous book,  and a great answer to all those modern novels that try to find meaning in life but fail.  The novel begins by talking about an affair, and gradually leads to a wonderful explanation of God's love for us as expressed in the Incarnation.  It's not exactly a happy story, but it will leave you feeling better.

BUD MACFARLANE JR
PIERCED BY A SWORD.   Macfarlane, the CatholiCity honcho, has written three novels so far, but his first one is, in my opinion, the best.  (Others may disagree.) Pierced by a Sword is an apocolyptic thriller, and unlike so many "End Times" books on the market, it's very, very Catholic.  And, come to think of it, it isn't REALLY about the End Times at all -- it's far more optimistic than that.  You can get a free copy by contacting Catholicity's Saint Jude Media.

CONCEIVED WITHOUT SIN.  Less apocalyptic or supernatural than MacFarlane's other two novels, this one is about friendship, love, marriage, faith, despair, and the way grace works in ordinary life. I highly recommend it.

FLANNERY O'CONNOR
A Southern writer, O'Connor is probably the most important novelist on this list as far as the literary world is concerned.  Her work may seem strange, to say the least, bushe was extraordinarily brilliant and, as her letters in THE HABIT OF BEING reveal, completely  Catholic.  I recommend her letters whole-heartedly even to those who don't care for her fiction, and her short stories are wonderful.  Get the complete short stories if you can, and then try one of her novels.

WALKER PERCY
Percy was an American writer of the late twentieth century, and a delightful American satirist.  His first novel was the award-winning novel THE MOVIEGOER, which is in many ways a quest for something of meaning in the emptiness of modern America.  

Two books which are perhaps more interesting to those Catholics interested in morality and society are LOVE IN THE RUINS and THE THANATOS SYNDROME, both of which feature Dr. Thomas More (a fictional descendent of the late saint).  LOVE IN THE RUINS is subtitled "The Adventures of a Bad Catholic at a Time Near the End of the World" and it quite deserve this, as it's rather apocolyptic in a political, rather than supernatural way.  It can be argued that there are some elements of the supernatural in this book, though, which put it at odds with its sequel, THE THANATOS SYNDROME, which is more purely science-fiction.

LANCELOT is a rather dark tale --certainly Percy's most depressing novel-- but it clearly shows the need for Christ, the only hope for this world.

EVELYN WAUGH
He (and I should point out first that Waugh WAS a he, not a she, despite the name) was a very weird writer indeed.  Not as strange as O'Connor, but odd.  His fiction is quite funny, so check him out if you have a strange sense of humor.

THE LOVED ONE.  The subtitle of this book refers to it as "an Anglo-American tragedy" and I suppose that's one description.  I would say that it's all about death and Englishness. Like all of his fiction, it's also about people and the absurdities of socity. Short and hilarious.

DECLINE AND FALL.  This book is strange, but not as quasi-surreal as some of Waugh's fiction. In fact, it reminded me of Roald Dahl's childrens books somehow.  This might be a good introduction to Waugh's fiction for those who aren't ready for the really weird stuff.

BRIDESHEAD REVISITED is one of Waugh's later novels, and it is more explicitly Catholic than his earlier work.  It is not nearly as satirical as some of Waugh's fiction, though it still has some delightfully funny moments, and is on the whole, far more serious and more satisfying in many ways.  If you read one Waugh book, this should be it.

VILE BODIES.  I can think of few novels that better illustrate the emptiness of secular society.  Waugh's description of life in early-twentiteth century England still has a lot of meaning today. If you read this, follow it up with
Brideshead Revisited or The End of the Affair to see the solution to the apparent emptiness of modernity displayed here.
LIVES OF THE SAINTS
SAINT THOMAS AQUINAS, by G. K. Chesterton.  A great Catholic author writing about the great Catholic philosopher: a perfect fit!  Chesterton's book was designed to serve as a simple introduction to Aquinas, his life and his work.  The result is a delightful book. Chesterton comes up with some good stories about "the Dumb Ox."

CONFESSIONS
, by St. Augustine.  This is Augustine's autobiography, but it's more than that.  It also serves as a good introduction to Augustine's theology.  I recommend reading this before tackling The City ofGod; I made the mistake of reading City of God first and when I came to Confessions,  I kept thinking things like: "So THAT's why he made such a big fuss about astrology" and so on.  If you're interested in Augustine, don't make my mistake!  Read Confessions first. 

JOAN OF ARC, by Mark Twain.  Mark Twain?  What's an agnostic doing writing about a saint?  Well, if his explanation at the beginning of the book is true, I'm inclined to call it a miracle.  Twain thought this the best book he ever wrote; I agree, but I have a slight prejudice: Joan was my Confirmation saint. Perhaps the most amazing thing about this book is that while Twain does NOT keep his acidic tongue in check, he has nothing but praise for Joan herself or her religion.  It's the corrupted and foolish people who surround her and who are responsible for her death that he lambasts.   HIGHLY RECOMMENDED.

EDMUND CAMPION, JESUIT AND MARTYR by Evelyn Waugh.  I've seen this titled ST. EDMUND CAMPION, PRIEST AND MARTYR.  Same book, just a different version.  If you didn't know that Catholics suffered during the first centuries after the Reformation, read this book. And next time people talk about the atrocities of the Catholic church, gently remind them that it was a horrible time and the horror wasn't inflicted only on Protestants.
MORALITY
BACK TO VIRTUE, by Peter Kreeft.  Kreeft, you may recall, wrote the excellent book Fundamentals of the Faith.  BACK TO VIRTUE is another good work about morality from the Catholic perspective.  Kreeft discusses each of the traditional seven deadly sins and how they can be opposed by one of the seven Virtues.  This is a book we really need these days!

THE TEN COMMANDMENTS, by Dr. Laura Schlessinger and Rabbi Stewart Vogel.  This book is written from a Jewish perspective rather than a Catholic one, but most of what Dr. Laura says applies equally well to Catholics.  She's not afraid to admit the importance of God in our daily lives, and she points out where selfishness, laziness, and other sins are causing problems in society.  This might be a good book to give someone who doesn't quite see the importance of a God-based morality.
THEOLOGY
THE CATECHISM OF THE CATHOLIC CHURCH.   This book belongs in every Catholic home. Furthermore, it belongs in the library of all serious students of religion, no matter what their creed.  I wouldn't say that you'll find ALL the answers here, but it's the place to start.  There are other Catholic catechisms available, in simpler styles, but this one's the Master plan for Catholic Catechisms.

THEOLOGY FOR BEGINNERS, by Frank Sheed. Sheed was a great apologist from earlier decades, but this is NOT an apologetics work. Rather, it is a basic grounding in theology.  This book is worth reading simply for the insights into the Trinity you'll get from it.  I have yet to see the Trinity discussed in a better way!

THEOLOGY AND SANITY
, by Frank Sheed.  This book is wonderful. Some of the issues it discusses are similiar to those dealt with in Theology For Beginners, but this goes into greater detail.  If you already have done some reading in theology, you might want to go to this book rather than Theology for Beginners.

CATHOLIC FOR A REASON, edited by Scott Hahn.  This is a collection of essays by various of Scott Hahn's former students --including, among others, my sister's theology professor! Small world, isn't it?  Each essay examines one aspect of Catholicism from a heavily Scriptural perspective.   Some topics include the Holy Trinity, Baptism, Mary, and Purgatory.

A FATHER WHO KEEPS HIS PROMISES, by Scott Hahn.  This is salvation history seen in light of covenant theology.  If you've ever wondered how the Bible fits together or what some of those weird Old Testament stories have to do with modern Catholicism, this is a good place to start.

THE LAMB'S SUPPER. This short book is an explanation of how the Mass is the liturgy described in the book of Revelation.  It builds on some of the ideas presented in Hahn's talks.  This shows that our participation in the Mass is actually a participation in the celebration going on in Heaven. Highly recommended.

LIFE OF CHRIST, by Fulton Sheen.  Wow. . .  this is a pretty deep book.  It's an indepth look at Christ's words, His works, and His mission.  Reading this will shed a great deal of light on the Gospel story.

INTRODUCTION TO MARY, by Mark Miravalle.  This is an excellent primer on Marian theology.  Miravalle explain's Mary's roles as the Mother of God, as a mediator (no, she doesn't take Christ's place!) and so on. This is good for anyone who's ever been challanged to explain Catholic teaching about Mary, or for anyone who wonders why Catholics make such a big deal about her, or for anyone who loves Our Lady!

THOMAS AQUINAS
I saved the stuff about Aquinas for last because, well, he's the man! After Christ, of course!  Those of us who aren't equipped for handling the SUMMA THEOLOGICA itself should be glad that there are other ways of coming into contact with the Angelic Doctor's works.

THE SUMMA OF THE SUMMA, edited and annoted by Peter Kreeft.  This is Thomas in his own words: selections from the Summa, plus commentary.  Some parts are fascinating, some less so, and some are (to me, at least) completely incomprehensible.

MY WAY OF LIFE, produced by the Confraternity of the Precious Blood. This book contains the basic theology of Aquinas presented simply.  It's the way I first encountered the Angelic Doctor (thanks for lending me the book, Dad!) and it is, in my opinion, excellent.  The authors of the books have a way with words, and the book is broken down into bite-size bits of profundity, which makes for easy reading.

ST. THOMAS AQUINAS, by Ralph McInerny.  I put this under theology rather than "lives of the Saints" because McInerny's main interest is in Thomas's philosophy, rather than his life. It is not quite as approachable as MY WAY OF LIFE, but it's pretty good.
Happy reading! If you need more recommendations, or if you want to talk about what you've read, try joining my yahoo club Literate Catholics Unite.