Police say the baby passed away in hospital on September 24, bringing the total number of children killed in the incident to two. The three-year-old sibling remains in critical condition.
The attack occurred on Sunday afternoon when emergency services and bystanders found the children and their mother with stab wounds in a car at Valley Heights, in the Blue Mountains west of Sydney. The mother was previously charged in connection with the first child's death and now faces an additional murder charge.
Authorities have not released further details about the circumstances leading up to the alleged attack. The investigation is ongoing.
The incident has sent shockwaves through the local community, with support services being offered to those affected. Police have urged anyone with information to come forward.