Artists put the finishing touches to wax figures of Britain's Prince Harry (left) and Meghan on July 30, 2020 in England. Photo: AFP

Prince Harry and Meghan Markle announced Sunday the birth of their daughter Lilibet Diana - named for Harry's grandmother Queen Elizabeth II and his late mother - in a moment of joy capping a year of increasingly strained ties between the couple and the British royal family.

The baby, who is eighth in line to the throne, was born healthy on Friday in the southern California city of Santa Barbara and is now with Meghan at the couple's home in the area.

"Lili is named after her great-grandmother, Her Majesty the Queen, whose family nickname is Lilibet. Her middle name, Diana, was chosen to honor her beloved late grandmother, the Princess of Wales," said a statement from Harry and Meghan.

"She weighed 7 lbs 11 oz (3.5 kilograms). Both mother and child are healthy and well, and settling in at home," the statement said of the couple's second child.

Shortly after the announcement, a Buckingham Palace spokeswoman said the Queen and the British royal family had been informed and were "delighted with the news of the birth of a daughter for the Duke and Duchess of Sussex."

Harry's father, Charles, and brother, William, also sent their congratulations.

"Wishing them all well at this special time," tweeted the Prince of Wales, while the Duke and Duchess of Cambridge said via a tweet that "We are all delighted by the happy news of the arrival of baby Lili."

British Prime Minister Boris Johnson also sent his congratulations.

Celebrities welcomed the news, with comedian Ellen DeGeneres, a friend of the couple, writing: "Congratulations Meghan, Harry and Archie. Welcome to the world Lilibet! I am more than a Lilibet excited to meet you."

The couple live in the US following their decision to quit frontline royal duties early on in 2020.

A message on their Archewell Foundation website said they were on parental leave, and added that any gifts could be sent as donations to four chosen charities: Girls Inc., Harvest Home, CAMFED and the Myna Mahila Foundation.

Harry and Meghan sat in March for a bombshell interview with US talk show host Oprah Winfrey, triggering the royal family's biggest crisis since Harry's mother died in a car crash in 1997.

During the two-hour sit-down, viewed by more than 17 million people in the US and over 11 million in Britain, Harry and Meghan said racism had played a part in them quitting Britain.

Meghan, a former actress, also told Winfrey she was "naively" unprepared for life as a royal and had contemplated suicide while pregnant with her first child Archie, now 2.

However, Lili's arrival struck a sweeter note after a painful, public period of their lives.

"She is more than we could have ever imagined, and we remain grateful for the love and prayers we've felt from across the globe," Harry and Meghan said.

"Thank you for your continued kindness and support during this very special time for our family."