The sensing ability of individual SnO(2) nanowires and nanobelts configured as gas sensors was measured before and after functionalization with Pd catalyst particles. In situ deposition of Pd in the same reaction chamber in which the sensing measurements were carried out ensured that the observed modification in behavior was due to the Pd functionalization rather than the variation in properties from one nanowire to another. Changes in the conductance in the early stages of metal deposition (i.e., before metal percolation) indicated that the Pd nanoparticles on the nanowire surface created Schottky barrier-type junctions resulting in the formation of electron depletion regions within the nanowire, constricting the effective conduction channel and reducing the conductance. Pd-functionalized nanostructures exhibited a dramatic improvement in sensitivity toward oxygen and hydrogen due to the enhanced catalytic dissociation of the molecular adsorbate on the Pd nanoparticle surfaces and the subsequent diffusion of the resultant atomic species to the oxide surface.