Heterostructured materials composed of In₂O₃ nanocrystals and graphene layers were successfully developed by facile synthesis technique. Such a binary heterostructure with suitable configuration and inimitable morphology exhibits rich and varied properties particularly in nanodevices such as gas sensors. FESEM investigation revealed that In₂O₃ nanocrystals were well monodispersed and disseminated on the complete surface of the graphene layers. XRD analysis also confirmed the presence of carbon peak in the spectrum due to the existence of graphene layers. Elemental mapping also reassured the homogenous and uniform distribution of In₂O₃ nanocrystals on the graphene surface. Room temperature photoluminescence was carried out to investigate the optical properties of In₂O₃/Graphene heterostructure. Hydrogen sensors made of In₂O₃/Graphene showed improved sensitivity which is attributed to benign surface interaction of In₂O₃ with graphene which enhanced overall electrical conductivity of heterostructure. This study offers strategies for the design and development of heterostructures with diverse variation of semiconductors configurations through simple technique for improved nanodevices.