We have proposed a hydrogen detection sensor based on a Pd (palladium)-coated, single-mode, optical fiber. The experimental results demonstrated that the sensor could detect hydrogen in air as well as in insulation oil. The influence of Pd film thickness and environmental temperature on response time and sensitivity was analyzed. The reflected optical power at the optical-fiber/Pd interface decreased as the concentration of hydrogen increased, in both air and the insulation oil. The sensor showed 0.75 dB of optical power variation when the concentration of dissolved hydrogen was saturated in the insulation oil.