Ganoderma lucidum mushroom-mediated green synthesis of nanocrystalline titanium dioxide (TiO2) is explored via a low-temperature (≤70 °C) wet chemical method. The role of Ganoderma lucidum mushroom extract in the reaction is to release the ganoderic acid molecules that tend to bind to the Ti4+ metal ions to form a titanium-ganoderic acid intermediate complex for obtaining TiO2 nanocrystallites (NCs), which is quite novel, considering the recent advances in fabricated gas sensing materials. The X-ray powder diffraction, field emission scanning electron microscopy, Raman spectroscopy, and Brunauer–Emmett–Teller measurements etc., are used to characterize the crystal structure, surface morphology, and surface area of as-synthesized TiO2 and Pd-TiO2 sensors, respectively. The chlorine (Cl2) gas sensing properties are investigated from a lower range of 5 ppm to a higher range of 400 ppm. In addition to excellent response–recovery time, good selectivity, constant repeatability, as well as chemical stability, the gas sensor efficiency of the as-synthesized Pd-TiO2 NC sensor is better (136% response at 150 °C operating temperature) than the TiO2 NC sensor (57% at 250 °C operating temperature) measured at 100 ppm (Cl2) gas concentration, suggesting that the green synthesized Pd-TiO2 sensor demonstrates efficient Cl2 gas sensing properties at low operating temperatures over pristine ones.