We have developed a Pd-functionalized hydrogen gas sensor based on a recessed AlGaN/GaN heterostructure field-effect transistor. The AlGaN barrier layer under the Pd catalyst was partially etched to enhance its sensitivity. Both low-power consumption and high sensitivity were achieved by employing a recessed structure. Sensor characterization was carried out at the temperature range from room temperature to 250 °C, among which the best sensing characteristics were observed at 200 °C. A sensitivity of 380% with a response time of 0.25 s was achieved at a bias voltage of 0.3 V at 200 °C under a hydrogen exposure concentration of 4%. The standby power consumption was only 2 μW for the sensing area of 100×28 μm² due to the low standby current, which was caused by the recessed AlGaN barrier layer.