In this work, a chemical sensor for concentration measurement of hydrogen peroxide is proposed based on localized surface plasmon resonance (LSPR). The silver nanoparticles coated by polyvinyl alcohol (PVA) have been prepared by the reduction process of silver nitrate (AgNO3) in aqueous PVA matrix. The LSPR wavelength of the Ag-PVA nanocomposites is 420nm, as measured by ultraviolet -visible spectrometer. When hydrogen peroxide is added into the solution of Ag-PVA nanocomposites, the silver nanoparticles become degradation during the decomposition of hydrogen peroxide. In this process, the light absorption caused by LSPR effect is reduced obviously. Based on this mechanism, the concentration of hydrogen peroxide can be determined by measuring the change of transmission power through the Ag-PVA nanocomposites. In our experiments, the threshold detection level of the sensor is less than 10 -3 M. Besides the chemical sensing applications, the proposed system can be also used to analyze the generation process of silver nanostructures under UV light illumination.