A simple co-precpitation method was used to synthesize Sn-doped In2O3 materials, with InCl3·4H2O as the precursor and SnCl4·5H2O as the dopant source. The morphology and structure of the synthesized nanoparticles were examined by X-ray diffraction and scanning electron microscopy (SEM), respectively. Moreover, we investigated the electrochemical properties of the synthesized nanoparticles by electrochemical impedance spectroscopy. The hot-wire type gas sensors based on Sn-doped In2O3 nanoparticles were fabricated, then gas-sensing properties were examined and the gas-sensing mechanism was discussed. SEM observation revealed that the composite nanoparticles had a uniform size in range of 9–20 nm. The responses of the ITO nanocrystalline sensors at 100 ppm ethanol were improved from 256 to 701 mV at 11.1 wt%. Furthermore, the response and recovery time of the ITO nanocrystalline sensors were 15 and 30 s, respectively. The gas-sensing mechanism analysis showed that the electrical conductivity of In2O3 was obviously increased by doping with Sn, thus the responses of the gas sensors to ethanol were significantly improved.