Daisy Lowe-Martin needed 24/7 care following an injury at Ipswich Hospital when she was eight weeks old.
Her family used the payments to buy a home in Ipswich they could adapt to her needs just before she died, aged seven.
The hospital said it was "fair and appropriate" they pay back some funds.
Her mother Katherine Coulson, 37, said: "What happened to her caused her to die at an early age, caused her to have all the problems she had.
"To take the money back knowing that is the reason she died is disgusting."
Daisy, who died in September 2019, was unable to move independently, was fed by a tube and needed carers to monitor her overnight.
After years of assessments, Ipswich Hospital accepted 90% liability for her brain injuries.
The family were awarded an interim payment so they could buy a bungalow which could be adapted to Daisy's needs as she grew, with big doorways for her wheelchair, hoists to lift her and space for her medical equipment.
Mrs Coulson, who was Daisy's full-time carer, said: "I just wanted the best possible life for her. This house was the ultimate goal and we battled for seven years to get it."
Daisy died six weeks before the settlement was signed off.
Mrs Coulson was unaware that if her daughter died before the final settlement, she would be expected to pay back some of the funds.
She said the only way they could afford to pay it back was to sell the house, leaving them homeless.
Mrs Coulson said she accepted the bungalow was too big for their needs, but hoped they could sell it and keep some of the money to buy a smaller home.
A spokesman for Ipswich Hospital said a final settlement was delayed because "as with all brain injury cases involving very young children, it is very rarely possible to fully assess the damages element of the claim until the child is much older, into their teens".
But after Daisy's "tragic and unexpected" death in 2019, a "just, fair and appropriate" final settlement was agreed in court in November 2020 and the family had to "repay a small proportion of the substantial interim payment".
Mrs Coulson said: "Not only have we lost Daisy, but we'll lose our home.
"I'm absolutely terrified."
NHS Resolution, which deals with medical negligence claims on behalf of hospitals, declined to comment.
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