Harry, 37, and Meghan Markle, 40, welcomed first child Archie two years ago.
The Duke and Duchess of Sussex welcomed Lilibet in June.
The insider added: “There’s just so much love and gratitude and they couldn’t ask for more.”
Prince Harry ‘adores’ daughter and loves reading bedtime stories to her
Meghan and Harry with their son Archie
The Duke and Duchess said in a statement: “On June 4, we were blessed with the arrival of our daughter, Lili.
“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.
“Thank you for your continued kindness and support during this very special time for our family.”
Meghan, Harry and Archie
Speaking to US Weekly, the royal source said: “Harry and Meghan finally feel free.
“They have so much to look forward to.
“Harry and Meghan have achieved success beyond their wildest dreams in the US and are settled and much more content living in Montecito, doing their own thing.
“They are determined to raise their children in a normal, stable environment, out of the spotlight, which would’ve [been] impossible if they’d remained royals.”
Meghan and Archie
In September, during a trip to New York, Meghan gushed about her daughter Lilibet.
During her visit to the Big Apple, Meghan was heard saying that her daughter was “beautiful”.
Source: EXPRESS CO UK