In this paper, pristine ZnO and Pd modified ZnO nanosheets have been successfully prepared via a facile hydrothermal route and the subsequent calcination process. The composition, morphology and nanostructure of the as-obtained materials were characterized by X-ray diffraction (XRD), field-emission scanning electron microscopy (FESEM) and transmission electron microscopy (TEM). The methane (CH4) sensing properties of Pd/ZnO were compared with those of pure ZnO, and the materials showed the noticeable sensing capability when the loading amount of Pd was 1 at%. Moreover, the optimal working temperature of ZnO was reduced from 240 °C to 200 °C after loading Pd. The synthesized 1% Pd/ZnO nanocomposites not only showed the maximum response value 19.20 toward 5000 ppm CH4 at 200 °C, but also exhibited the excellent selectivity and good repeatability. The improvement of CH4 sensing performance by Pd nanoparticles could be attributed to the synergy effect with the spill-over effect and the nano-Schottky barriers.