The humidity sensor deployed in the practical field experiences oxygen along with nitrogen (N2) in atmospheric air. Thus, the influence of other atmospheric gases on humidity sensor performance is much needed. In this article, an investigation of humidity sensor in N2 and Synthetic Air is proposed to understand the influence of oxygen on sensor response properties. An Interdigitated (IDE) humidity sensor was initially designed in COMSOL to optimize the sensor’s physical parameters, and its electric field distribution was studied. The fringing field is observed at the edges of the electrode structure. The inexpensive IDE humidity sensor was fabricated using low-cost PCB with Polyethylene glycol (PEG) sensing film. The sensor static and dynamic characterization has been performed using the Flow-mixing (FM) technique in both N2 and Synthetic Air. The sensor capacitive response is obtained in the range of 8–85%RH. The fabricated sensor response properties such as sensitivity, response/ recovery time, reproducibility, and hysteresis have been obtained. The sensor exhibits a little lower capacitive response and sensitivity in Synthetic Air compared to N2 gas due to the presence of oxygen. The sensor response is slow when tested in Synthetic Air. The sensor gave reproducible response and little hysteresis was observed. In frequency analysis, sensor shows more sensitivity at a low frequency of 1 kHz as compared to a high frequency in both N2 and Synthetic Air. As such, research findings suggest the need for recalibration of humidity sensors in synthetic air before utilizing them in applications with the presence of oxygen.