Luanne revealed her pregnancy to Lucky and the Hill family in the episode "Edu-macating Lucky." The two ended up having a shotgun wedding, even though they had wanted a more traditional ceremony.
Gracie was born on February 8th, 2009, at The Heimlich County Hospital.
Before her birth, Lucky's sister Myrna wanted Luanne to have a water birth at home surrounded by the entire famiy, with Peggy stepping in to take Luanne to the hospital.
Luanne, loopy from pain medication, suggested giving Gracie the name Lasagna when she was born. Thanks to Hank and Peggy intervening, she was named Gracie instead. Her middle name is Margaret in honor of Peggy by Peggy herself.
Gracie is an extremely happy baby most of the time, giggling and doing strange things that make her laugh. She last appeared in the series finale.