Due to the development of emerging technologies we are now able to produce nano-diamonds in a cost-effective way for the commercially viable production of nano-diamond sensors. In this study, we develop an appropriate hybridized plasma treatment technique for the fabrication of nitrogen incorporated diamond films and study their H-2 sensing properties. The morphology and crystallinity of as-prepared nitrogen-ultrananocrystalline diamond (N-UNCD) films can be improved by using a suitable hybridized plasma process with Ar/CH4/H-2 for the formation of nitrogen-hybrid diamond (N-HiD) materials. The as-prepared N-UNCD and N-HiD films were then subjected to lithography with a lateral electrode to fabricate H-2 sensing devices. The sensitivity of the as-prepared N-UNCD films and the N-HiD films for H-2 gas was studied at room temperature. The results of this systematic study demonstrate that the N-HiD films possess an improved H-2 gas response of 6.2%, which is better than that of the as-prepared N-UNCD films (0.7%). The N-HiD films also exhibit excellent selectivity, repeatability, and long-term stability after 60 days of exposure to H-2 in the on/off state. The significant improvement in the H-2 sensing performance of the N-HiD based sensor can be attributed to the modification of the surface morphology and the resistance. The hybridized plasma alters the resistivity of the surface by etching of the nanographite to form ultranano-sized diamond grains, which support the efficient electron transport of gas molecules. This study is a noteworthy step to fulfilling the demand for diamond based sensor applications.