The special flower-like Pd-loaded indium oxide (In2O3) hierarchical microstructures with different Pd contents were successfully synthesized by a hydrothermal method, showing the features dimension of 5–7μm diameter and 30nm thick nanosheets. Developed NO2 sensors based on 1mol% Pd-loaded In2O3 hierarchical microstructures demonstrated excellent NO2 detection at the ppb levels at lower operating temperature of 110°C. These sensors also exhibited high response, fast response (180s) and recovery (90s) time and great reliability as well as simplicity in fabrication. Furthermore, selective detection of NO2 can be readily achieved with sensors attached with 1mol% Pd-loaded In2O3 even with other common chemicals such as ethanol, CO, CH4 and H2 around. The electron depletion theory was used to explain the enhanced gas sensing mechanism.