Polyaniline (PAni) films modified by different loading of α -Fe₂O₃ nanoparticles have been formed by solid state synthesis method and investigated for various oxidizing and reducing gases. We demonstrates that α -Fe₂O₃ nanoparticles (50%): PAni hybrid nanocomposites films are highly selective to NH₃ with high sensitivity (50 at 100ppm), fast response time (29s) and highly reproducible response curves. X-ray diffraction analysis, field emission scanning electron microscopy observations, X-ray photoelectron spectroscopy and Fourier transform infrared spectroscopy analysis revealed that the n –type α –Fe₂O₃ nanoparticle transfers the electrons to polyaniline forms into a incredibly reduced state. These observations in PAni/α-Fe₂O₃ hybrid nanocomposites is insensitive to interaction with other gases except ammonia. The sensing mechanism of PAni/α-Fe₂O₃ hybrid nanocomposites to NH₃ was interpreted with the help of proposed energy band diagram. In-addition to this, the interaction mechanism between the NH₃ and PAni/α-Fe₂O₃ hybrid nanocomposite was investigated by an impedance spectroscopy tool.