The 7-month-old's picture was picked from more than 170,000 entries by a panel of judges.
Each year, parents are invited to submit photos in the contest for a cash prize.
Isla's parents will receive $1,500 in Gerber clothing and $50,000 from the company, which the couple said will be used for paying off some debts, saving for both of their children's future and some charitable causes.
"Isla is always so happy, and we really think it showed in her winning photo," said Isla’s mom, Rachael Welch. "She’s got that same smile on her face every day."
Isla's pictures will be featured on Gerber's social media accounts all year long, and she has the option to appear in more advertisements.