Nanocomposite materials consisting of ZrO2 and Pd phases were prepared by heating the amorphous Zr65Pd35 alloy for 24 h at 553 K in air. The maximum hydrogen absorption amount is about 2.4 mass% (H2/Pd) at 323 K and 2.2 mass% (H2/Pd) at 423 K at hydrogen pressure of 1 MPa. The absorption amount of Pd nanoparticles in the nanocomposite is a few times larger than those for the bulk and powder Pd metals. The remarkable increase in the hydrogen absorption/desorption amounts seems to result from the isolated dispersion state of Pd nanoparticles in the ZrO2 phase containing a tremendously large interface area in the nanocomposite.