Gas sensors based on optical absorption changes in thin films are of interest for detection of various gases such as CO, NO, H2. Optical gas sensors have several advantages over conventional electronic gas sensors, including the potential for higher sensitivity, reduced signal noise, and compatibility with combustible gases. Pulsed laser deposition (PLD) is an excellent method to prepare thin films with controllable thickness, composition and microstructures. Recently, our group reported that films of cobalt oxide prepared by PLD exhibit remarkably high sensitivity), showing an absorbance change in CO gas 70 times greater than those prepared by sputtering methods). Here we examine the effect of film microstructure and composition on CO gas sensing properties in order to identify the origin of the high sensitivity. Cobalt oxide films were prepared by PLD from a CoO target in an inert argon gas at various pressures. Films prepared near vacuum were smooth and continuous while the porosity and grain size increased linearly with pressure. In addition the pressure affected the composition and the thickness of the films. Data on the detection of CO gas suggests a direct relationship between sensitivity to CO gas and the effective surface area of films. We will discuss how the ablation plume can be used to tune the surface area for optimal sensitivity, and will demonstrate origin of the high detection sensitivity based on the structural changes with detecting gas.