We propose an optical fiber-based localized surface plasmon resonance sensor to overcome limitations with hydrogen gas explosions in various types of hydrogen sensors and minimize human damage caused by exposure to hazardous environments. For selective detection of hydrogen, a simple palladium-capping process was applied on a fiber-optic localized surface plasmon resonance. After the palladium-capping, the sensor was exposed to various refractive index solutions to confirm the linearity of the response. Hydrogen gas reactivity was measured at concentrations from 0.8% to 4%; the reaction time at each concentration was observed as 116 s until the signal stabilized. The coefficient of variation (CV) and limit of detection (LOD) were calculated based on the results obtained through repeated measurements. The reproducibility was verified with an average CV of 11%. In addition, the developed sensor showed a low LOD of 0.086%. The hysteresis characteristic was observed within 1% in the output change, which was similar to the fluctuation range allowed by the light source per time. The proposed sensor based on the optical principle is expected to reduce the risk of explosions and has advantages in a simple configuration and low-cost production based on optical fiber.