In this paper, a femtosecond laser fabricated fiber inline micro Mach-Zehnder interferometer with deposited palladium film for hydrogen sensing is presented. Simulation results show that the transmission spectrum of the interferometer is critically dependent on the microcavity length and the refractive index of Pd film and a short microcavity length corresponds to a high sensitivity. The experimental results obtained in the wavelength region of 1200-1400 nm, and in the hydrogen concentration range of 0-16%, agree well with that of the simulations. The developed system has high potential in hydrogen sensing with high sensitivity.