The study of Reynolds algebras has its origin in the well-known work of O. Reynolds on fluid dynamics in 1895 and has since found broad applications. It also has close relationship with important linear operators such as algebra endomorphisms, derivations and Rota-Baxter operators. Many years ago, G. Birkhoff suggested an algebraic study of Reynolds operators, including the corresponding free algebras. We carry out such a study in this paper. We first provide examples and properties of Reynolds operators, including a multi-variant generalization of the Reynolds identity. We then construct the free Reynolds algebra on a set. For this purpose, we identify a set of bracketed words called Reynolds words which serves as the linear basis of the free Reynolds algebra. A combinatorial interpretation of Reynolds words is given in terms of rooted trees without super crowns. The closure of the Reynolds words under concatenation gives the algebra structure on the space spanned by Reynolds words. Then a linear operator is defined on this algebra such that the Reynolds identity and the desired universal property are satisfied.