Choose a piano method and use it to begin learning how to recognize the notes. There are many methods available, and most target particular ages to make it easier to find one that fits your needs. Learn the notes on the staff, beginning with middle C. Focus on either treble clef or bass clef at first to reduce confusion. More advanced students should use flash cards to drill note recognition, especially those above and below the staffs. They should also learn how to recognize intervals and note patterns (scales, arpeggios and chords).
Practice reading rhythms. Learn how to play whole notes (4 beats), dotted half notes (3 beats), half notes (2 beats), quarter notes (1 beat) and eighth notes (1/2 beat). Use rhythm flash cards and practice reading the rhythms by tapping or clapping. Using a metronome will help you learn how to keep a steady beat.
When approaching a new piece of music, get in the habit of looking at important parts of the music before playing: the key signature, time signature, dynamic levels, and phrase markings. Also look for any changes in time signature, repeats or coda signs. Read through the music mentally and make note of any difficult rhythms or large jumps.
Spend five to ten minutes of your daily practice time reading new music (or music you have not looked at for several months). Use music that is slightly below your playing ability for your sight reading practice. If you are making mistakes, go to even easier music. Once you can play a new piece cleanly at the right tempo, move on to more difficult music.
Keep your eyes on the music. Work on developing your relative sense of touch to feel where the keys are and how various intervals feel to your hand. Play scales or arpeggios in the dark to develop your ability to play without looking at your hands.
Develop the habit of not stopping when you make a mistake. If you hit a bad note, just keep going. The ability to recover and keep the tempo will disguise many errors (Note: do this only when practicing sight reading. When trying to learn a song, stop when you make a mistake and practice the section until it is accurate.)