A tilted fiber Bragg grating (TFBG) hydrogen sensor coated with a palladium (Pd) membrane by the electroless plating method is proposed in this paper. A uniform layer of Pd metal is fabricated in aqueous solutions by the chemical coating method, which is used as the sensitive element to detect the change of the surrounding refractive index (SRI) caused by hydrogen absorption. The change in SRI causes an unsynchronized change of the cladding modes and the Bragg peak in the TFBG transmission spectrum, thereby eliminating the cross-sensitivity due to membrane expansion and is able to simultaneously monitor the presence of cracks in the pipe, as well as the hydrogen leakage. By subtracting the wavelength shift caused by fiber expansion, the change of SRI, i.e., the information from the H2
level, can be separately obtained. The drifted wavelength is measured for the H2
concentration below the hydrogen explosion limit between 1% and 4%. The chemical-based coating has the advantages of a low cost, a simple operation, and being suitable for coating on long fiber structures. The proposed sensor is able to detect the H2
signal in 5 min at a 1% H2
concentration. The proposed sensor is proved to be able to monitor the hydrogen level without the cross-sensitivity of temperature variation and expansion strains, so could be a good candidate for security applications in industry.