The daughter of one's niece or nephew is traditionally referred to as either a grand niece or great niece. Both are widely considered correct, as the child is one additional step removed from the individual in question. Similarly, the aunt of one's parent is commonly considered to be a great aunt, while the uncle of a person's parent is referred to as a great uncle.
The naming conventions for one's relatives can be a bit confusing, especially for distant relatives. However, descendants of siblings are always nieces or nephews. Alternately, cousins can be even more convoluted. Descendants of an aunt or uncle are always first cousins. Great aunts' and uncles' offspring are second cousins, and so on. Meanwhile, the children of these cousins are considered once removed, and their children are twice removed, and so on.
According to Merriam-Webster, the first known use of the term "great niece" was in 1884. The first known use of the term "grand niece" dates back to 1804. The terms "great aunt" and "great uncle" have been in use even longer, with their first known uses dating back to 1637 and 1547, respectively. Some families choose to call these relations grandaunt and granduncle, as they are the siblings of grandparents.