Safiya Gadhafi, her daughter Aisha and sons Hannibal and Mohammed entered Algeria on Monday, while Gadhafi and several other sons remain at large.
Algeria's Health Ministry said that Aisha Gadhafi gave birth to a girl on Tuesday. The official provided no other information, including on where she gave birth.
Rebel leaders said they were not surprised to hear Algeria welcomed Gadhafi's family. Throughout Libya's six-month uprising, rebels have accused Algeria of providing Gadhafi with mercenaries to repress the revolt.
The rebels demand that Algeria return them for trial and call any decision to host them an "aggressive act against the Libyan people's wish."
Gadhafi remains at large and the Obama administration says it has no indication that he has left Libya.
Meantime, rebel forces are reporting one of Gadhafi's other sons likely has been killed. They say his son Khamis died after a battle with rebel forces.
Rebels also pledged Tuesday to launch an assault within days on Gadhafi's hometown.
The rebels and NATO said that Gadhafi loyalists were negotiating the fate of Sirte, a heavily militarized city some 250 miles east of the capital, Tripoli.
Mustafa Abdel Jalil, the head of the rebels' National Transitional Council, said that negotiations with forces in Sirte would end Saturday after the Muslim holiday of Eid al-Fitr, when the rebels would "act decisively and militarily."
A NATO spokesman said it's possible Sirte might surrender without a fight.
The Associated Press contributed to this story.