The tragedy unfolded at a home south of Piedmont, Okhlahoma, after the little boy, Bralyn Shively, reportedly pushed on a hammock where his 36-year-old uncle, Chris Coates, was whittling wood with a knife.
The hammock, in his family's Piedmont backyard, suddenly snapped and Coates fell out.
He landed on the boy and the blade stabbed through youngster's chest, the New York Daily News reported.
Coates, who was visiting from Iowa, screamed out for help as he desperately performed CPR on the bleeding toddler.
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Oklahoma City police were still investigating the incident, but Sergeant Gary Knight told NewsOK that, currently, all the evidence points towards it having been "an accidental death".
"Bralyn showed love on his family and friends, and everyone loved him," the family said in a statement.
The Canadian County District Attorney's Office will make a formal ruling on the case at a later date.
An autopsy will also be carried out in the next few days. Coates has not been arrested in connection with his nephew's passing.