Although metal nanoparticle/graphene composites have been widely used as the electrode in electrochemical sensors, two effects, consisting of the particle size of the nanoparticles and the hydrodynamic diffusion of analytes to the electrodes, are not yet fully understood. In this work, palladium nanoparticles/reduced graphene oxide (PdNPs/rGO) composites were synthesized using an in situ polyol method. Palladium(II) ions and graphene oxide were reduced together with a reducing agent, ethylene glycol. By varying the concentration of palladium(II) nitrate, PdNPs with different sizes were decorated on the surface of rGO sheets. The as-fabricated PdNPs/rGO rotating disk electrodes (RDEs) were investigated toward hydrazine detection. Overall, a 3.7 ± 1.4 nm diameter PdNPs/rGO RDE exhibits high performance with a rather low limit of detection of about 7 nM at a rotation speed of 6000 rpm and provides a wide linear range of 0.1-1000 μM with R(2) = 0.995 at 2000 rpm. This electrode is highly selective to hydrazine without interference from uric acid, glucose, ammonia, caffeine, methylamine, ethylenediamine, hydroxylamine, n-butylamine, adenosine, cytosine, guanine, thymine, and l-arginine. The PdNPs/rGO RDEs with larger sizes show lower detection performance. Interestingly, the detection performance of the electrodes is sensitive to the hydrodynamic diffusion of hydrazine. The as-fabricated electrode can detect trace hydrazine in wastewater with high stability, demonstrating its practical use as an electrochemical sensor. These findings may lead to an awareness of the effect of the hydrodynamic diffusion of analyte that has been previously ignored, and the 3.7 ± 1.4 nm PdNPs/rGO RDE may be useful toward trace hydrazine detection, especially in wastewater from related chemical industries.