Sputter deposited Al doped ZnO (AZO) thin films exhibit a dual hydrogen sensing response in the temperature range 40 °C–150 °C after surface modifications with palladium nanoparticles. The unmodified AZO films showed no response in hydrogen in the temperature range 40 °C–150 °C. The operational temperature windows on the low and high temperature sides have been estimated by isolating the semiconductor-to-metal transition temperature zone of the sensor device. The gas response pattern was modeled by considering various adsorption isotherms, which revealed the dominance of heterogeneous adsorption characteristics. The Arrhenius adsorption barrier showed dual variation with change in hydrogen gas concentration on either side of the semiconductor-to-metal transition. A detailed analysis of the hydrogen gas response pattern by considering the changes in nano palladium due to hydrogen adsorption, and semiconductor-to-metal transition of nanocrystalline Al doped ZnO layer due to temperature, along with material characterization studies by glancing incidence X-ray diffraction, atomic force microscopy, and transmission electron microscopy, are presented.