Pd-doped SnO₂ hollow spheres were synthesized via a facile one-step hydrothermal route. Utilized as the materials in sensors, the 3.0 wt% Pd-doped SnO₂ demonstrated more excellent gas-sensing properties towards CO than 1.5 wt% and 4.5 wt% Pd-doped SnO₂. Compared with the SnO₂ hollow spheres gas sensor, the optimum operating temperature of the Pd-doped SnO₂ hollow spheres gas sensor dropped to 200 °C from 250 °C; the response value to 100 ppm CO was raised to 14.7 from 2.5 accordingly. Furthermore, the response and recovery times of the 3.0 wt% Pd-doped SnO₂ sensor are 5 s and 92 s, respectively, to 100 ppm CO at 200 °C. It is believed that its enhanced gas-sensing performances are derived from the synergistic interactions between the dispersed Pd and the characteristic configuration of the SnO₂ hollow sphere. In addition, theoretical calculations have also been performed with periodic slab models by using density functional theory, which explain well our experimental phenomenon.