Three children - aged one, three and five - and a 42-year-old woman were discovered with wounded in Sydney's Blue Mountains about midday on Sunday.
Witnesses offered first aid on the side of Waratah Road before emergency services arrived.
Paramedics pronounced a five-year-old child dead at the scene and treated the others.
On Thursday evening, police confirmed the one-year-old child had died at the Children's Hospital at Westmead.
The three-year-old remains at the hospital in a critical condition.
The woman was also treated at Westmead Hospital.
Detectives on Tuesday charged the woman in a bedside court hearing with murder - domestic violence.
Authorities also charged her with two counts of wounding with intent to murder - domestic violence at the time.
She was denied bail to appear before Penrith Local Court in November.
"The woman will face an additional charge of murder over the death of the one-year-old child," a NSW Police spokesperson said on Wednesday.
Local Superintendent John Nelson on Sunday said the father was "going about (his) business" at work when he received news of the alleged attack.
"You can imagine receiving that tragic news," he said at the time.
The woman was not previously known to police, Supt Nelson said.
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