The integration of metal microstructures and soft materials is promising for the realization of novel optical and biomedical devices owing to the flexibility and biocompatibility of the latter. Nevertheless, the fabrication of three-dimensional metal structures within a soft material is still challenging. In this study, we demonstrate the fabrication of a silver diffraction grating inside a biocompatible poly(ethylene glycol) diacrylate (PEGDA) hydrogel by using a 522-nm femtosecond laser via multi-photon photoreduction of silver ions. The optical diffraction pattern obtained with the grating showed equally spaced diffraction spots, which indicated that a regular, periodic silver grating was formed. Notably, the distance between the diffraction spots changed when the water content in the hydrogel was reduced. The grating period decreased when the hydrogel shrank owing to the loss of water, but the straight shapes of the line structures were preserved, which demonstrated the optical tunability of the fabricated structure. Our results demonstrate the potential of the femtosecond laser-based photoreduction technique for the fabrication of novel tunable optical devices as well as highly precise structures.