A study of a sensor for hydrogen (H2) detection based on fiber Bragg gratings coated with palladium (Pd) with self-temperature compensation is presented. The cladding around the gratings was reduced down to 50 μm diameter by a chemical etching process. One of the gratings was left uncoated, and the other was coated with 150 nm of Pd. It was observed that palladium hydride has unstable behavior in environments with high humidity level. A simple solution to overcome this problem based on a Teflon tape is presented. The sensing device studied was able to respond to H2 concentrations in the range 0%-1% v/v at room temperature and atmospheric pressure, achieving sensitivities larger than 20 pm/% v/v. Considering H2 concentrations in nitrogen up to 1%, the performance of the sensing head was characterized for different thicknesses of Pd coating ranging from 50 to 200 nm.