A new in-line mode coupling interferometer based on photonic crystal fiber (PCF) was designed for hydrogen sensing. The external surface of the PCF was coated with Pd-WO3 hydrogen-sensitive film using the sol–gel scheme. Pd-WO3 film refractive index and volume changing influenced the model of the PCF interferometer while the hydrogen concentration was changing, which caused the output spectrum to shift. Therefore, the relationship between the wavelength shift and the hydrogen concentration was established. In the experiment, the wavelength shift showed good linearity as the hydrogen concentration changed from 0% to 1%, while the sensitivity was 1.09 nm/% and the detection resolution was 0.3 perthousand. The sensor showed good repeatability and the wavelength error was less than 40 pm in 30 min. In addition, the sensor was not affected by external temperature fluctuations, which indicates good practical development prospects.