Hydrogen gas is rapidly approaching a global breakthrough as a carbon-free energy vector. In such a hydrogen economy, safety sensors for hydrogen leak detection will be an indispensable element along the entire value chain, from the site of hydrogen production to the point of consumption, due to the high flammability of hydrogen-air mixtures. To stimulate and guide the development of such sensors, industrial and governmental stakeholders have defined sets of strict performance targets, which are yet to be entirely fulfilled. In this Perspective, we summarize recent efforts and discuss research strategies for the development of hydrogen sensors that aim at meeting the set performance goals. In the first part, we describe the state-of-the-art for fast and selective hydrogen sensors at the research level, and we identify nanostructured Pd transducer materials as the common denominator in the best performing solutions. As a consequence, in the second part, we introduce the fundamentals of the Pd-hydrogen interaction to lay the foundation for a detailed discussion of key strategies and Pd-based material design rules necessary for the development of next generation high-performance nanostructured Pd-based hydrogen sensors that are on par with even the most stringent and challenging performance targets.