The effect of Pd-Ag alloy atomic ratio composite films on the hydrogen sensing properties of microstructured Fiber Bragg Grating (FBG) was studied. The spiral microstructures were fabricated on fiber cladding using femtosecond laser. The Pd-Ag alloy films with different atomic ratio prepared by magnetron sputtering were coated on the surface of spiral microstructured FBG. A novel microstructured FBG hydrogen sensor with optimized Pd-Ag alloy ratio was developed. The Pd-Ag thin films were characterized and analyzed by scanning electron microscope and energy dispersive spectroscopy. The hydrogen sensing of three kinds of FBG probes with different Pd: Ag atomic content (Pd∶Ag=2∶1, 4∶1, 6∶1) was tested. At room temperature, the probe with Pd4-Ag1 film has the best hydrogen sensing performance. The microstructured probe with Pd-Ag atomic ratio of 2∶1 has the fastest response speed but the lowest sensitivity. The wavelength shift of the spiral micro-structured sensor towards 4%H2 is 107 pm. Compared with the same type of FBG hydrogen sensor, it has higher sensitivity and faster response time.