In this study, we synthesized Pd-graphene oxide (Pd-GO) nanocomposite layers on SiO2/Si substrates using chemical method. Pd-GO layers were treated with swift heavy ion irradiation (100 MeV Ag ions, 1013 ions/cm2). The structural properties of the pristine as well as the ion irradiated samples were investigated using synchrotron grazing incidence x-ray diffraction (XRD) and field emission scanning electron microscopy (FESEM) techniques. XRD shows peaks corresponding to Pd (FCC, space group-Fd-3m), GO and synthetic graphite. The relative graphite peak intensities increased after ion irradiation, indicating reduction of GO. The sensor responses of nanocomposite layers towards exposure of 35 ppm H2 at 100 °C, were measured for several cycles. Ion-irradiated Pd-GO samples show enhancement in the sensing response of H2 gas by about 24% and with lower recovery times (25%), as compared to pristine Pd-GO nanocomposite samples. The change in type of conductivity from p-type gas sensing layer in pristine nanocomposite to n-type conductivity, along with an increase in conductivity (about 500 times) in ion irradiated samples were observed. The change in type of conductivity on ion-irradiation is attributed to the reduction of GO layer and the changes in conductivity on hydrogen exposure is explained due to hydrogen spill-over effect in the two-component system. The improvement in sensitivity upon ion-irradiation was due to the increase in concentration of structural defects due to electronic energy loss, as studied by SRIM simulation. This study points towards using ion induced electronic energy loss as a new tool for varying the gas sensing properties of GO based sensors.