It is well-known that helical surface states of a three-dimensional topological insulator (TI) do not respond to a static in-plane magnetic field. Formally this occurs because the in-plane magnetic field appears as a vector potential in the Dirac Ham
iltonian of the surface states and can thus be removed by a gauge transformation of the surface electron wavefunctions. Here we show that when the top and bottom surfaces of a thin film of TI are hybridized and the Fermi level is in the hybridization gap, a nonzero diamagnetic response appears. Moreover, a quantum phase transition occurs at a finite critical value of the parallel field from an insulator with a diamagnetic response to a semimetal with a vanishing response to the parallel field.
