In this work, a conductive hydrogel was successfully synthesized, taking advantage of the high number density of active amino and hydroxyl groups in carboxymethyl chitosan and sodium carboxymethyl cellulose. These biopolymers were effectively coupled via hydrogen bonding with the nitrogen atoms of the heterocyclic rings of conductive polypyrrole. The inclusion of another biobased polymer, sodium lignosulfonate (LS), was effective to achieve highly efficient adsorption and in-situ reduction of silver ions, leading to silver nanoparticles that were embedded in the hydrogel network and used to further improve the electro-catalytic efficiency of the system. Doping of the system in the pre-gelled state led to hydrogels that could be easily attached to the electrodes. The as-prepared silver nanoparticle-embedded conductive hydrogel electrode exhibited excellent electro-catalytic activity towards hydroquinone (HQ) present in a buffer solution. At the optimum conditions, the oxidation current density peak of HQ was linear over the 0.1–100 μM concentration range, with a detection limit as low as 0.12 μM (signal-to-noise of 3). The relative standard deviation of the anodic peak current intensity was 1.37% for eight different electrodes. After one week of storage in a 0.1 M Tris-HCl buffer solution at 4 °C, the anodic peak current intensity was 93.4% of the initial current intensity. In addition, this sensor showed no interference activity, while the addition of 30 μM CC, RS, or 1 mM of different inorganic ions does not have a significant impact on the test results, enabling HQ quantification in actual water samples.