A novel fiber optical refractive index sensor based on gold nanoshells immobilized on the surface of an etched single-mode fiber including a Bragg grating is demonstrated. The nanoparticle coating induces refractive index dependent waveguide losses, because of the variation of the evanescently guided part of the light. Hence the amplitude of the Bragg reflection is highly sensitive to refractive index changes of the surrounding medium. The nanoshell functionalized fiber optical refractive index sensor works in reflectance mode, is suitable for chemical and biochemical sensing, and shows an intensity dependency of 4400% per refractive index unit in the refractive index range between 1.333 and 1.346. Furthermore, the physical length of the sensor is smaller than 3 mm with a diameter of 6 μm, and therefore offers the possibility of a localized refractive index measurement.