The Freedom of the Seas vessel was docked in San Juan, Puerto Rico when the incident unfolded on Sunday afternoon local time.
Initial reports say the girl, named locally as Chloe Wiegand, was on the 11th deck of the ship playing with her grandfather, Salvatore Anello, when he slipped while holding her and lost his grip.
Some reports say that he was holding her up near or out of the window but that hasn't been confirmed. The dining hall has tall glass windows and one of them was said to be open.
The baby fell to the concrete of the Pan American dock in San Juan, and died in hospital shortly afterwards.
Both her sets of grandparents, her parents and her younger brother were said to be on the ship at the time. Tourists on board have reported hearing the little girl's mum, Kimberley Schultz Wiegand, crying in pain.
'[We heard] the screams of the families because we were close,' a nearby passenger told Telmundo PR.
'I looked because of the mother's cry. That tonality, a scream of pain of that nature, does not compare with any other scream.'
The girl's father has been named as South Bend police officer Alan Wiegand.
On Monday the police department released a statement saying: 'The South Bend Police Department offers its sincerest condolences to officer Wiegand and his family during this difficult time following the tragic loss of their child while in Puerto Rico. The department asks the community to pray for the entire Wiegand family as they grieve and to respect their privacy.'
The incident is being investigated and CCTV footage has been requested as well as statements from those on board and witnessed the incident.
A spokesperson for Royal Caribbean Cruises Ltd. told the Daily Mail: 'We are assisting local authorities in San Juan, PR as they make inquiries after an incident aboard Freedom of the Seas earlier today.
'We do not have further information to share at this point.'