A new type of light diffracting hydrogel composite film consisting of nanoparticles and polymer has been fabricated through a combined physical chemical polymerization process. In this fabrication approach, polymers with ionic functional groups for molecular recognition were successfully incorporated into a hydrogel of colloidal photonic crystals. We first embedded crystalline colloidal arrays into a nonionic polymer hydrogel by a physical freeze thaw process using a formulation that contained poly(vinyl alcohol), dimethyl sulfoxide, water, and monodispersed polystyrene nanoparticles. Then, a second ionic polymer network, which interpenetrates into the first polymer network, was formed through a photochemical polymerization process. During the formation of the second polymer network, functional groups for molecular recognition were introduced. Finally, the physically cross-linked nonionic polymer network was removed by hydrothermal dissolution, leaving the chemically cross-linked ionic polymer network intact to support the nanoparticle arrays and to perform chemical sensing. This approach significantly reduces the complexity of established methods, in which multiple-step chemical reactions are required to incorporate functional groups into the polymer hydrogel. A new acrylic acid hydrogel with embedded colloidal photonic crystals was made as an example to demonstrate pH sensing based on diffraction induced by changes of lattice parameter of the crystalline colloidal arrays.