The paper presents a simple and inexpensive method for the preparation of an efficient hydrogen gas sensor based on exfoliated Pd-decorated single-walled carbon nanotubes (SWNTs). SWNTs were synthesized by catalytic chemical vapor deposition of methane using a fixed-bed catalytic reactor over hydrides of Mm0.2Tb0.8Co2 obtained through hydrogen decrepitation technique. Purified and chemically treated SWNTs were functionalized with Pd, resulting in nanostructured Pd dispersion on the SWNT surface. Structural, morphological and vibrational characterizations were carried out using XRD, TEM, HRTEM, Raman spectroscopy and FTIR spectroscopy. Sensor devices were fabricated by spraying palladium-dispersed chemically treated SWNT dispersions on smooth glass substrates. Systematic investigations on the hydrogen sensing properties of Pd-SWNT were carried out. Pd-functionalization of the employed SWNT enabled increasing the device response towards hydrogen. Exfoliated SWNT achieved using gum arabic (GA) showed better response to hydrogen when compared to naive purified SWNT. The fabricated thin film sensors exhibited good reversible and reproducible response towards hydrogen at room temperature.