Semiconductor mixed-metal oxides with perovskite structure are of increasing interest for the application in chemical sensors. LaCoO3 has been extensively studied for its peculiar electronic and magnetic properties, but less is known of the gas sensing mechanisms of this material and its composites. In this work, nanocrystalline LaCoO3 was synthesized by sol-gel method and functionalized by Ag nanoparticles. An improved sensitivity to H2S was observed for Ag/LaCoO3 sensors, in contrast to pure LaCoO3 sensor. The Ag/LaCoO3 sensors had minimum cross-sensitivity to CO and NH3 interfering gases, which were present at higher concentrations than H2S. The role of Ag nanoparticles in the selective sensitivity of Ag/LaCoO3 nanocomposites to H2S gas were unveiled using in situ infrared (DRIFT) spectroscopy.