The baby, from a family who lived in the area where the plane came down, was snatched to safety as chunks of debris and fuselage rained down on the street.
At least two of the 98 on board are now confirmed to have survived the disaster including a bank chief who was in seat 1C.
Zafar Masood, president of the Bank of Punjab, suffered some fractures but was "conscious and responding well", officials said.
A total of 56 bodies have so far been brought to the nearby Jinnah Hospital.
'MAYDAY, MAYDAY'
According to witnesses, the aircraft circled the airport two or three times before plummeting into the residential area and destroying several buildings at 2.45pm local time today.
The pilot made one aborted landing attempt before reporting a technical problem, according to local media reports.
Moments before the crash, the desperate pilot contacted air traffic control saying: "We have lost two engines. Mayday, mayday, mayday. It's serious."
One senior civil aviation official said it appeared the plane had been unable to lower its wheels for landing due to a technical fault, but it was too early to determine the cause.
Pictures emerging from the scene show bodies being carried away from the wreckage by emergency workers.
The civil aviation authority said eight staff and 99 passengers were on the Airbus A320.
Pakistani model Zara Abid, who has nearly 80,000 Instagram followers, is believed to be one of the victims on the doomed aircraft.