In the present work, the effect of carbon shell around size selected palladium (Pd) nano particles on hydrogen (H-2) sensing has been studied by investigating the sensing response of Pd-C core-shell nanoparticles having a fixed core size and different shell thickness. The H-2 sensing response of sensors based on Pd and Pd-C nanoparticles deposited on SiO2 and graphene substrate has been measured over a temperature range of 25 degrees C-150 degrees C. It is observed that Pd-C nanoparticle sensor shows higher sensitivity with increase in shell thickness and faster response/recovery in comparison to that of Pd nanoparticle samples. Pd-C nanoparticles show room temperature H-2 sensitivity in contrast to Pd nanoparticles which respond only at higher temperatures. Role of carbon shell is also understood by investigating H-2 sensing properties of Pd and Pd-C nanoparticles on graphene substrates. These results show that higher catalytic activity and electronic interaction at Pd-C interface, a complete coverage and protection of Pd surface by carbon and presence of structural defects in nanoparticle core are important for room temperature and higher sensing response. 2017 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.