Palladium (Pd) nanoparticles (NPs) were synthesized via polyol route by varying concentration of capping agent, polyvinylepyrollidone (PVP). High resolution TEM study showed that the palladium nanoparticles were nearly spherical shape in the size range 11–13 nm. Hydrogen response pattern of the devices fabricated with the synthesized Pd NPs were recorded and were found to vary with the concentration of PVP. Also, response magnitude increased with PVP concentration for a particular pattern. Smooth recovery was observed both with and without the flow of carrier gas. While the sensor performance was found to be best at room temperature, the device performance deteriorated with the increase in temperature. Excellent long-term stability was observed as the devices showed similar response after 30 days of testing. The reproducible hydrogen response of these devices was supported by X-ray diffraction studies done on samples before and after hydrogen sensor study. The variation in response with the concentration of PVP is corroborated with a suitable sensing mechanism.