The girl was walking with her 17-year-old sister and five-year-old brother along a pavement in Coupar Angus when a two-car crash happened at around 3.20pm.
The two-year-old was hit, causing fatal injuries, and her brother and sister were also injured.
The incident happened on the A94 Forfar Road at its junction with Larghan Park.
Police Scotland said in a statement: “The A94 Forfar Road will remain closed to allow collision investigation to be completed and allow inquiries into the full circumstances of the incident to continue.
“Anyone who has information that could assist officers with their inquiries is asked to contact Police Scotland on 101.”