Under Canberra's harsh immigration policy, asylum-seekers attempting to arrive in Australia by boat are sent to camps in Papua New Guinea and Nauru, where they are held indefinitely while their refugees applications are processed.
The one-year-old baby, named Asha and the child of Nepalese asylum-seekers, was held on Nauru with her parents before being brought to the Australian mainland for medical treatment last month.
Immigration Minister Peter Dutton said today Asha and her parents would be sent to community detention from Brisbane's Lady Cilento Children's Hospital.
"We are proposing that baby Asha will come from Lady Cilento and will go into community detention as have, as I say, 83 others who are living in the community who are in Australia for medical assistance," Dutton told reporters in Brisbane.
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Dutton said the government's decision was pre-planned and not a result of pressure from medical professionals and the public.
The hospital confirmed the decision and said the move would take place "within the next 24 hours".
Refugee advocates welcomed Dutton's announcement, hailing it as a victory for their campaign against the deportations to Nauru of Asha and 266 other asylum-seekers also in Australia for medical care.
"Now the family is being released into the community. It's a massive turn-around."
Annastacia Palaszczuk, Labor Premier of Queensland, the state in which the hospital is located, said Dutton's decision was "too slow and lacked empathy" as she renewed her offer to house asylum-seekers facing removal in the community.