We have studied the effect of gas phase hydrogen dilution on the properties of amorphous hydrogenated silicon (a-Si:H) thin films and on the characteristics of Thin Film Transistors (TFTs) in which the active layer is grown with varying hydrogen dilution. The films showed an initial decrease in conductivity followed by an increase with hydrogen dilution. We think that microcrystallization at large hydrogen dilution could be the cause of the increase in conductivity. TFTs were made in the inverted staggered structure with a silicon nitride layer as the insulator. We see a factor of 20 improvement in mobility as the gas phase hydrogen concentration is increased from 0% to about 98% without a significant change in the current ON/OFF ratio.