A new method by introducing a photonic crystal fiber (PCF) inline interferometer for hydrogen sensing is demonstrated. The sensing unit contains a piece of PCF, constituting a reflection-type hydrogen sensing system. One end and the outer face of the PCF are plated with a thin palladium film under vacuum conditions, while the other end connects to the optical path. Therefore, a set of all-fiber hydrogen sensor is accomplished. Hydrogen concentration from 0 to 5% is detected in the experiment and the related interferometric resonant wavelength shift is recorded. The maximum wavelength shift is over 1.2 nm. Compared with hydrogen sensors based on fiber Bragg grating, the sensitivity of the experiment has great improvement. The whole system not only has an all-fiber optical path without any bulk-optic components, but also owns a high sensitivity.