Nicole Kidman cried when she was told she had been nominated for an Academy Award.

The 43-year-old star is up for the Best Actress Oscar at the upcoming ceremony for her performance in 'Rabbit Hole' and she admits she burst into tears of joy when she was given the happy news.

However, Nicole - who is married to country musician Keith Urban - had to explain her emotional state to her two-year-old daughter Sunday because she was confused by her mother's reaction.

Speaking at the Santa Barbara International Film Festival at the weekend, she said: "Poor Sunday. They said my name, and Keith was like, 'Yeah!' and jumping around the kitchen. And Sunday is like, 'What's happening? Why are you crying?' Because I was crying.

"She said, 'Why are we sad?' I said, 'No. We're not sad, Sunday. We're happy.' So, that would be my memory of this nomination - my daughter and my husband jumping around the kitchen."

The actress admits life couldn't be any better at the moment following the arrival of her and Keith's second daughter Faith Margaret - who was born via a gestational carrier in December - and her Academy Award nomination.

The screen beauty - who previously won the Best Actress Oscar in 2002 for her role in 'The Hours' - told People: "I think I'm just at a place in my life where I'm in my 40s and realise I've been very fortunate. I'm very grateful, because I've certainly lived through my fair share of pain and loss. So now, to be where I'm waking up in the morning going, 'Thank you, God,' is a very beautiful place to be."

Nicole was presented with the Cinema Vanguard Award at the Santa Barbara International Film Festival in recognition of her achievements in both film and theatre.