The transition toward hydrogen gas (H2) as an eco‐friendly and renewable energy source necessitates advanced safety technologies, particularly robust sensors for H2 leak detection and concentration monitoring. Although palladium (Pd)‐based materials are preferred for their strong H2 affinity, intense palladium–hydrogen (Pd–H) interactions lead to phase transitions to palladium hydride (PdHx), compromising sensors’ durability and detection speeds after multiple uses. In response, this study introduces a high‐performance H2 sensor designed from thiolate‐protected Pd nanoclusters (Pd8SR16), which leverages the synergistic effect between the metal and protective ligands to form an intermediate palladium–hydrogen–sulfur (Pd–H–S) state during H2 adsorption. Striking a balance, it preserves Pd–H binding affinity while preventing excessive interaction, thus lowering the energy required for H2 desorption. The dynamic adsorption‐dissociation‐recombination‐desorption process is efficiently and highly reversible with Pd8SR16, ensuring robust and rapid H2 sensing at parts per million (ppm). The Pd8SR16‐based sensor demonstrates exceptional stability (50 cycles; 0.11% standard deviation in response), prompt response/recovery (t90 = 0.95 s/6 s), low limit of detection (LoD, 1 ppm), and ambient temperature operability, ranking it among the most sensitive Pd‐based H2 sensors. Furthermore, a multifunctional prototype demonstrates the practicality of real‐world gas sensing using ligand‐protected metal nanoclusters.