A model for the electronic states in the nanostructured metal oxide based semiconductor materials (NSSM) explaining the mechanism of their sensing properties is suggested. It is shown that as the nanoparticle diameter a decreases down to critical size aCR∼80–100nm, the redistribution of electrons from bulk donors to the surface vacancies (“surface electron traps”) takes place. This leads to a significant (by three orders of magnitude) drop in the bulk conduction electron density and to the phenomenon of called “charge carrier self-exhaustion” of the nanostructured materials. As a result, conductance of the material becomes very sensitive to the concentration of gas molecules adsorbed on the surface. Due to this physical phenomenon, NSSM with a<aCR is a suitable material for gas sensor fabrication. The interaction of NSSM with electronegative gases is studied within the model. In the model, the effects arising in contacts to the sensing layer are not considered.