In 1999, Stoke City paid a club-record fee of £600,000 for Gunnarsson. He spent four years at the Britannia Stadium, making over 150 appearances, before moving onto Nottingham Forest on a free transfer in 2003.
However, he did not impress at the City Ground and was loaned back to Stoke just months later before Watford signed him in the summer of 2004, taking advantage of another Bosman move.
Gunnarsson signed for Watford in the summer of 2004, after being released by Forest. He made 43 appearances in an impressive first season. However, Ray Lewington's replacement as Watford manager, Adrian Boothroyd, to some raised eyebrows from the Watford support, allowed Gunnarsson to leave for Reading for a nominal fee in the summer of 2005. Boothroyd gave the justification that Gunnarsson was too similar to his central midfield partner, Gavin Mahon, and of lesser quality.
On 13 November 2006, Gunnarsson signed a contract extension to keep him at Reading until June 2008.
Gunnarsson may not be considered as a first team regular by most, but he has scored plenty of important goals. Notable goals include an impressive strike against Liverpool, an equalising goal against Manchester United in the 2006-07 season's FA Cup and a winning goal in the dying moments against Sheffield United in the 2005-06 Championship season.