A major factor that hinders the realization of indium oxide (IO) as a potential gas/photosensor is the response time, which is quite poor. For instance, the photoresponse of dc sputtered IO films under UV and sub-bandgap illumination is known to exhibit bi-exponential decay with fast (10-100 min) and slow (∼3000 min) time constants. We demonstrate here that the response time can be greatly improved by the hot carriers generated through localized surface plasmon decay. Our study shows that when IO films are incorporated with gold nanoparticles (AuNPs), the fast and slow decay time constants are reduced by a factor of 20 and 30, respectively, at excitation wavelengths close to the localized surface plasmon resonance (LSPR) wavelength. We also show the possibility to achieve wavelength tunable reduction in the time constants by tuning the LSPR wavelength. We attribute the changes to the strong enhancement in the recombination rates facilitated by plasmon decay-mediated excess hot electrons injected into the conduction band of IO. We use a simple analytical model to explain the role of plasmon-mediated hot electrons in enhancing the recombination rate. We believe that the present results are of great significance to improve the response time of metal oxide based photodetectors/sensors, in general, since the underlying physical process depends primarily on the plasmonic nature of the AuNPs.