Single crystalline indium oxide (In2O3) octahedra have been synthesized by means of a vapor phase transport method at high temperature. The resulting material has been characterized by FE-SEM, HR-TEM, XRD, XPS and PL. The gas sensing properties of this material against oxidizing and reducing gases have been examined and the conditions for selectively detecting such gases have been established. A high response towards NO2 has been obtained at a relatively low optimal operating temperature (i.e., 130 °C) and even at room temperature. The fact that the response of the nanomaterial is more than two orders of magnitude higher for NO2 than for H2, even in the presence of ambient moisture, makes it very promising for the selective detection of oxidizing species (at ppb levels) under real ambient conditions. The addition of noble metal nanoparticles (Pt and Pd) combined with an increase in the operating temperature (i.e., 250 °C) significantly increases H2 sensitivity and dramatically decreases the response to NO2. However, in this case, the presence of humidity negatively affects the response to H2. The sensing mechanisms are introduced and discussed.