A magnetoresistive hydrogen sensor and sensing method thereof, wherein the hydrogen sensor comprises a substrate located in an X-Y plane, magnetoresistive sensing units and magnetoresistive reference units located on the substrate. The magnetoresistive sensing units are electrically connected to form a sensing arm, and the magnetoresistive reference units are electrically connected to form a reference arm. The sensing arm and the reference arm are electrically interconnected to form a referenced bridge structure. The magnetoresistive sensing units and the magnetoresistive reference units may be AMR units having the same magnetic multilayer thin film structure, GMR spin valves, or GMR multilayer film stacks having the same magnetic multilayer thin film structure. The magnetoresistive sensing units and the magnetoresistive reference units are respectively covered with a Pd layer, and a passivating insulation layer is deposited over the Pd layer of the magnetoresistive reference units. The magnetic multilayer thin film structure is made into a serpentine strip circuit by a semiconductor micromachining process. The hydrogen detecting method comprises placing the hydrogen sensor in a gas environment containing hydrogen, the Pd layers covering in the magnetoresistive sensing units absorb hydrogen to change the perpendicular magnetic anisotropy of ferromagnetic layers in the magnetic multilayer thin film structures of the magnetoresistance sensing units, which makes the magnetic moment of the ferromagnetic layer rotate to produce a change in the magnetoresistance value that correlates to the hydrogen concentration. The resulting change of the magnetoresistance value changes the output voltage value of the referenced bridge structure, and this change of the output voltage value of the referenced bridge structure is used to measure the hydrogen concentration.