Basic H₂ gas-sensing characteristics of Pd Schottky diodes formed on the AlGaN/GaN heterostructure were investigated in vacuum. By introducing a novel surface control process to reduce reverse leakage currents, an unprecedented high H₂ sensitivity was achieved where 1 Torr hydrogen caused five orders of magnitude change of current. Surprisingly, the surface control process did not change the C-V characteristics which showed an unexpectedly large shift 1000 mV on H₂ exposure. Transient waveforms were almost exponential for the logarithm of current, and response speed increased with increase of H₂ pressure and temperature. These results were explained in terms of Schottky barrier height due to adsorption of atomic hydrogen generated by Pd together with a due consideration of the current transport mechanism under reverse bias. [DOI: 10.1380/ejssnt.2005.314]