Hydrogen (H2) detection using metal-oxide semiconductor (MOS) sensors is often limited by insufficient active sites, slow surface reactions, and modest sensitivity. To overcome these constraints, we developed a highly responsive hydrogen sensor based on bimetallic palladium–silver (Pd–Ag) decorated zinc ferrite (ZnFe2O4, ZFO) nanoparticles synthesized via a low-temperature self-combustion route. Ag was incorporated during ZFO preparation (1–4 wt%), followed by post-synthesis surface decoration with Pd (0–1.25 wt%). Structural, morphological, and chemical analyses were performed using X-ray diffraction (XRD), Raman spectroscopy, field-emission scanning electron microscopy (FE-SEM), energy-dispersive X-ray spectroscopy (EDS), and X-ray photoelectron spectroscopy (XPS). Gas-sensing measurements demonstrate that Ag loading enhances the H2 response up to an optimum of 2 wt%, while co-decoration with 0.75 wt% Pd yields an exceptionally high response of 3500 % to 5000 ppm H2 at 350 ◦C, representing a 70-fold improvement over pristine ZFO. The enhanced performance originates from increased oxygen vacancies, a higher density of chemisorbed oxygen species, and synergistic chemical and electronic sensitization provided by Pd–Ag nanoclusters. Compared with previously reported monometallic-decorated or undecorated ZFO sensors, the Pd–Ag/ZFO system exhibits markedly superior sensitivity, selectivity, and response dynamics, highlighting its promise for next-generation hydrogen detection technologies.