In the present study, polyaniline (PANI) and ferrous oxide (α‐Fe2O3) are amalgamated for ammonia sensing purpose. The hybrid nanocomposite is prepared by a single step in situ chemical oxidative polymerization of aniline in presence of hydrothermally prepared α‐Fe2O3 nanoparticles. The structural and compositional analyses of the hybrid material are fully executed by FTIR, PXRD, and SEM techniques. A naive, exceedingly selective, quickly restorable, and ambient temperature functioning ammonia detecting device is established by using PANI/α‐Fe2O3. The investigation results indicate that the PANI/α‐Fe2O3 hybrid nanocomposite exhibits selective sensing ability towards ammonia vapors. The PANI/α‐Fe2O3 displays excellent response for 5 ppm and maximum response for 100 ppm of ammonia. The response time of the PANI/α‐Fe2O3 sensor is found to be quick with reasonably short recovery time. Due to excellent reusability, good environmental stability, and highly economical synthesis the PANI/α‐Fe2O3 delivers a capable, simple, and efficient sensor system for ammonia detection at ambient temperature.