We describe a facile, economic, and environment friendly green method for simultaneous detection of palladium ions (Pd2+) and recovery Pd nanoparticles (Pd NPs) from wastewater through a non-toxic gamma-irradiation based reduction reaction. Basic orange 2 (BO), an azo dye, is used as a sensing probe in Pd2+ detection and acts as a stabilizing agent in the recovery of monodispersed small Pd NPs. The presence of Pd2+ in waste water was easily observed by naked eye through the color change from yellow to red upon adding the Basic orange 2. More importantly, Pd forms a square-planar structured complex with Pd2+ which aids the development of smaller and monodispersed Pd NPs during radiolytic reduction. The size control mechanism during the recovery of Pd NPs was ascertained by varying the intensity of gamma-ray (from 10 to 50 kGy) and initial concentrations of Pd2+ (from 20 to 100 ppm). We are able to control the size of Pd NPs from 5 to 400 nm by irradiating gamma-ray doses from 1 and 50 kGy, as evident from UV-vis absorption spectra (UV-vis) and transmission electron microscopy (TEM) images. About 15 nm colloidal Pd NPs were formed at 10 kGy gamma-irradiation, and various sizes of aggregates, which may be attributed to Ostwald ripening crystal growth, were observed in the irradiation condition of 20 to 50 kGy. Further, the size of the recovered Pd NPs increases as the Pd2+ concentration increased, due to the increase in the ion association rate. Our proposed green method is a promising strategy that can easily detect Pd2+ from waste water and recover Pd NPs in desired size and morphology.