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From The Collaborative International Dictionary of English v.0.48:
Niece \Niece\ (n[=e]s), n. [OE. nece, F. ni[`e]ce, LL. neptia, for L. neptis a granddaughter, niece, akin to nepos. See Nephew.] 1. A relative, in general; especially, a descendant, whether male or female; a granddaughter or a grandson. [Obs.] --B. Jonson. Wyclif. Shak. [1913 Webster] 2. Especially: A daughter of one's brother or sister, or of one's brother-in-law or sister-in-law. In modern English, this is the primary meaning. [1913 Webster]