We propose a simple hydrogen detection scheme based on a Mach-Zehnder interferometer formed with a pair of palladium-coated long-period fiber gratings (LPGs). Since an LPG pair offered a fine-structured interference fringe in its transmission spectrum, the resolution as a sensor could be appreciably enhanced compared to that of a single LPG. As the palladium layer absorbed hydrogen, the effective refractive indices of the cladding modes were increased so that the interference spectrum was blue-shifted up to 2.3 nm with a wavelength sensitivity of -0.29 nm/min for 4% of hydrogen concentration.