Sherin, who went missing on October 7, was found dead in a culvert under a road about a half a kilometre from her home on October 22.
The biological daughter of Indian-Americans Wesley and Sini Mathews was placed in foster care October 9, two days after Sherin was reported missing by her adoptive father, who was later charged with serious bodily injury to a child, Dallas News reported.
The biological daughter has now been placed with a family member living in Houston, the report quoted Child Protective Services (CPS) as saying.
Sherin's sister remained in foster care while a judge weighed placement options. A home-study was completed of a relative's home in the Houston area, Marissa Gonzales, a spokeswoman with the Department of Family and Protective Services said.
The child was released days after her mother Sini was arrested for abandoning and endangering Sherin, for leaving the 3-year-old alone at home.
Sini has been lodged at the Dallas county jail on a bond of $ 250,000.
Sini appeared before a family court judge November 13, days before her arrest, to attempt to regain custody of Sherin's sister, who has not been named, but the judge decided to delay part of the custody proceedings because of "aggravated circumstances" in the case, it said.
The next hearing is scheduled for November 29. Sherin's body was found October 22 in a culvert less than a kilometre from the Mathewses' home. The medical examiner has not yet ruled on her cause of death.
When the CPS removes a child from the custody of his or her parents, the agency prefers to place the child with a family member.
The CPS allows children to visit incarcerated parents, though it rarely happens. If Sini were to bond out of jail, the agency could ask the judge for restricted visitation rights, Ms Gonzales has said.
Wesley, 37, told police that at some point later that night or early the next morning, he helped Sherin with her milk, but she choked and stopped breathing, police said.
Police said they have not determined whether Sherin was alive when they returned home an hour and a half later.