A thin layer of palladium (Pd) was deposited on the surface of an etched air hole photonic crystal (PhC) vertical cavity surface emitting laser (VCSEL) to form a hydrogen gas (H2) sensor. H2 reacts with Pd, forming PdHx, which induces a shift in the complex refractive index. With Pd on its surface, the reflectivity of the top distributed Bragg reflector depends on the H2 concentration. We present device operation theory and experimental results showing a 60% output power increase and a 52 pm redshift of the lasing wavelength at 4% H2. Since the PhC VCSEL laser is single mode and the wavelength shift is comparable to the laser linewidth, the sensor can provide an accurate quantification of the H2 concentration over the range of 0-4% H2.