Based on DFT calculations, GaNNTs and Pd doped GaNNTs were proposed as gas-sensing materials for detecting the characteristic dissolved gases: C 2 H 2 and H 2 in insulating oil. The gas-sensing responses of GaNNTs, and Pd n -GaNNTs (n = 1–2) to C 2 H 2 and H 2 were studied. It is found that Pd n -GaNNTs shows higher reactivity and sensitivity to C 2 H 2 and H 2 than pristine GaNNTs. The electrical conductivity of Pd n -GaNNTs decreased obviously after the adsorption of C 2 H 2 and H 2 , and the gas-sensing responsiveness of Pd n -GaNNTs to C 2 H 2 and H 2 was improved with the number of the doped Pd atoms. Both of pristine GaNNTs and Pd n -GaNNTs show higher response to C 2 H 2 than that to H 2 . This study provides a theoretical basis for the experimental development of a high-performance gas sensor for on-line monitoring the characteristic dissolved gases in transformer oil. • Pd n cluster modified GaNNTs (Pd n -GaNNTs, n = 1–2) is used to detect the dissolved gases of insulating oil: C 2 H 2 and H 2 . • The sensing characteristics of GaNNTs, and Pd n -GaNNTs (n = 1–2) to C 2 H 2 and H 2 modified GaNNTs were calculated by DFT. • Pd n -GaNNTs (n = 1–2) show good adsorption properties to C 2 H 2 and H 2 by physisorption and chemisorption.