This thesis describes the development and characterisation of palladium optical coatings for hydrogen sensing. The main aim of the thesis was to optimise an optically interrogated palladium coated substrate to detect hydrogen at concentrations less than 1% in humid conditions (50-80%). An optical set up was constructed to investigate the change in the coatings in transmission at 650 nm on exposure to varying hydrogen concentrations in dry and wet conditions. Three different optical substrates; Polymer Optical Fibre (POF), Polymethyl methacrylate (PMMA) and glass were evaluated to determine the best support for palladium; criteria of selection were based on hydrogen detection performance in dry and humid condition (50%). PMMA was shown to be the ideal support as effect of humidity on hydrogen detection was minimal. Palladium was deposited by sputter coating technique and the coating thickness demonstrates a dependence on the deposition time and position of the substrate inside the coating chamber. The coating developed showed a response time of 1s at 5%H2, a detection range of 0-9.1% with a demonstrated detection limit of 200 parts per million (ppm) and a predicted limit of detection of 15 ppm. The rate of hydrogen detection was proposed to be diffusion limited for coating thickness up to the threshold thickness. At thicknesses less than the threshold thickness, the rate limiting step was related to the binding force between the coating and the support. The coating performance was unaffected by cross sensitive gases such as hydrogen sulphide, carbon monoxide, methane and ethene. In the presence of Relative Humidity (50-80%), the coating reached a limit of detection at 0.1% H2. However, over exposure to humidity lead to temperature effect which was compensated using a temperature compensation model developed. The surface of the coating developed was characterised by Atomic Force Microscopy (AFM), X-Ray Diffraction (XRD) and X-Ray Photoelectron Spectroscopy (XPS) and revealed that the coating developed is unaffected by the tests carried out through the PhD.