A new hydrogen sensor was fabricated by coating a Pd-decorated In2O3 film on Au electrodes. In response to 1 vol% H2 at room temperature, an ultra high sensitivity of 4.6 × 107 was achieved. But after an annealing treatment in vacuum, its sensitivity degenerated by 4 orders of magnitude. In addition, the response time and recovery time were also extended from 28 s and 32 s to 242 s and 108 s, respectively. It was found from contrast experiments that Pd decoration was essential to make the sensor work at room temperature and Schottky barriers played a vital role in enhancing the sensor's performance. The methodology demonstrated in this paper shows that a combination of novel sensing materials and Schottky contact is an effective approach to design high-performance gas sensors.