This study involved depositing thin films of copper oxide (CuO) and copper oxide films incorporated with neodymium oxide (Nd2O3) in various weight ratios using the pulsed laser deposition technique to fabricate an ammonia gas sensor. The characteristics of the developed films were characterized using X-ray diffraction (XRD), field emission scanning electron microscopy (FE-SEM), and photoluminescence spectroscopy (PL) techniques. The study investigated the impact of incorporating Nd2O3 into the CuO film on its sensing characteristics. The X-ray analysis revealed a polycrystalline structure of CuO with a crystal size of 19 nanometers. Furthermore, incorporating CuO and Nd2O3 formed a mixed phase comprised of both CuO and Nd2O3. The average crystallite size varied with the Nd2O3 incorporation rate from 19 nm to 14.7 nm. With increasing Nd2O3 incorporation ratios, the surface morphology changed from smooth to spherical-like nanostructures, and the average particle sizes varied from 28 nm to 130 nm. The PL spectrum analysis results confirmed that the incorporation of Nd2O3 resulted in a change in the peak intensity of the PL spectrum, with a significant increase in the peak associated with oxygen vacancies, contributing to the improvement of the sensor response. The incorporation of Nd2O3 greatly enhanced the sensitivity of the as-deposited CuO film. The sample with 5 wt.% Nd2O3 exhibited the maximum sensitivity, reaching 180% against 79 ppm NH3 at a working temperature of 50∘C.