We propose a compact hydrogen sensor, based on Fabry-Perot interferometer with Pd/Ag composite film, fabricated by femtosecond laser micromachining and thin-film coating technique. The sensing characteristic of sensor with 150-nm Pd76/Ag24 composite film is studied, and the device is tested to measure the hydrogen volume ratio range of 0-8%. Experimental results show that the response of the sensor is reversible, and the system shows high potential in hydrogen detection.