A high-sensitivity Pd/InP Schottky diode hydrogen sensor has been fabricated and demonstrated. The detecting mechanism associated with the metal-semiconductor interface property has also been studied. The reduction of Schottky barrier in the ambient containing hydrogen results in the significant increase of current. For 50ppm hydrogen concentration in air, a hydrogen saturation sensitivity of 2 can be obtained. In addition, the transient response exhibits short reaction and recovery times of 5 and 12 seconds, respectively.