Nanostructured titanium dioxide (TiO₂) has attracted significant attention due to its excellent physicochemical properties and promising performance in gas-sensing applications. In this study, alkoxide-derived TiO₂ gel was subjected to hydrothermal treatment at 150 °C for 3 h in diluted nitric acid solutions of pH 2 and pH 3 in order to obtain nanocrystalline TiO₂ with enhanced thermal stability. The influence of hydrothermal conditions on phase stability, crystallite growth, morphology, and gas-sensing behavior was systematically investigated. Structural evolution and phase composition of TiO₂ powders were analyzed using X-ray diffraction (XRD), while the surface morphology and particle size were examined using field-emission scanning electron microscopy (FE-SEM). The results demonstrate that hydrothermal treatment significantly improves the thermal stability of TiO₂ through two primary mechanisms: suppression of crystallite growth during calcination and an increase in the anatase-to-rutile phase transformation temperature. However, the extent of stabilization strongly depended on the pH of the nitric acid solution. Untreated TiO₂ powders exhibited predominant rutile phase formation when calcined at 700 °C. In contrast, TiO₂ powders hydrothermally treated at pH 3 retained a high fraction of the anatase phase even after calcination at elevated temperatures. After calcination at 600 and 800 °C, these samples consisted of fine anatase nanospheres with average particle sizes of approximately 13 nm and 34 nm, respectively. Correspondingly, the anatase crystallite sizes were estimated to be around 11 nm and 26 nm at 600 and 800 °C, confirming a pronounced inhibition of crystallite growth due to hydrothermal processing. Despite the reduced crystallite size, the anatase-to-rutile transformation was not completely suppressed. For the TiO₂ sample hydrothermally treated at pH 3, the rutile phase fraction increased progressively with calcination temperature, reaching approximately 9%, 22%, and 67% at 600, 700, and 800 °C, respectively. These observations indicate that crystallite size alone does not exclusively govern the phase transformation behavior of TiO₂, and that other factors such as defect chemistry, surface energy, and acid-induced structural modifications also play important roles. Gas-sensing properties were evaluated using thick-film sensors fabricated from the prepared TiO₂ powders. Although the hydrothermally treated powders particularly those processed at pH 3 exhibited slightly higher sensitivity, the overall sensor response toward diluted carbon monoxide (CO) in air at operating temperatures between 400 and 550 °C showed only minor variation among the samples.