This paper proposes a confined solid-state conversion approach using layered metal-hydroxides for the production of a colloidal suspension of porous 2D crystalline metal oxide layers with superior electrochemical H O sensing performance. This study investigates the conversion chemistry of delaminated layers of gadolinium hydroxide (LGdH), [Gd (OH) ] , encapsulated in a silica nanoshell that provides an antistacking and antisintering environment during the phase-transition at high temperature. Thermal treatment of the LGdH layers within the protected environment results in a dimensionally confined phase-transition into crystalline Gd O nanosheets with an isomorphic 2D structure. Furthermore, annealing at higher temperatures leads to the evolution of in-plane mesoporous structure on the Gd O nanosheet. Based on insight acquired from in-depth investigation, the evolution of in-plane porosity proceeds through the in-plane dominant silicate-formation reaction at the interface with the surrounding silica shell. Their 2D-anisotropic and mesoporous morphological features are preserved, producing a colloidal suspension of holey nanosheets that can be used to fabricate a thin and porous film through wet-coating deposition. This study also demonstrates the superior electrochemical H O sensing ability of the resultant porous Gd O film, which represents a ≈1000- and 10-fold enhancement of the detection limit and sensitivity, respectively, in comparison to previously reported Gd O films.