A novel sensitive, specific, and reversible optical sensor for the palladium(II) ion was created by impregnating an agarose membrane with 4-(2-amino-3-hydroxypyridine-4-ylazo)1,5-dimethyl-2-phenyl-1,2-dihydropyrazol-3-one (AHDDO). Spectrophoto-metric studies of complex formation between AHDDO base ligand and Mn2+, Cd2+, Co2+ Hg2+, Zn2+, Cu2+, Pd2+, Sr2+, Al3+, Fe3+, Au3+, and Ag+ metal ions in ethanolic solution indicated a substantially larger stability for the palladium ion complex. Therefore, the AHDDO was immobilized on a clear agarose film and used as a suitable ionophore for the building of a selective Pd2+ optical sensor. By combining the sensing membrane with Pd2+ ions at pH 5.75, a clear color change from orange to violet was observed. On the immobilization of AHDDO, the effects of ionophore concentration, pH, temperature, stirring, and reaction time were investigated. A linear relationship was observed between the membrane absorbance at 633 nm and Pd2+ concentrations in a range from 15–225 ng mL−1 with a detection (3σ) and quatification (10σ) limits of 4.25 and 14.25 ng mL−1, respectively. For the determination of Pd2+ ions, no significant interference from 400 times concentrations of a number of possibly interfering ions was found. The sensor has been successfully used to find palladium in biological, soil, road, and water samples.