Canberra Hospital lost the remains of a stillborn baby, which were later found at an offsite laundry facility.
The girl's remains were missing for more than two days in October before the linen service company made the discovery.
The mother of the stillborn girl said the hospital had been considerate and caring, but she fears it happened due to under-staffing.
The mother said the baby was born stillborn in October at 19 weeks and 6 days.
"Saying goodbye to our baby girl and leaving her at the hospital was one of the hardest things we have ever done," she said in a submission to a Legislative Assembly inquiry into ACT's public maternity services.
"I wrapped her up in the blankets provided by the hospital, completely covering her as I had seen the midwife unwrap her from this the day before."
The parents left the hospital and considered visiting the next day but the thought of saying goodbye again was too much.
Two days later, hospital staff visited them at home and told them they had been unable to locate the baby's remains.
The hospital only realised the baby was missing when an autopsy was due to take place, the submission said.
"We lived with the grief of not only losing our daughter, but also that we would never get to lay her little body to rest for 24 hours," the mother said.
The next day, the hospital called to say the linen service company had found their baby's remains and she had been returned to the hospital.
"On Wednesday 23 October we visited at the morgue of the hospital to ensure she was safe and to say goodbye to her once again," the mother said.
The mother said she was told by a midwife that the maternity unit had lost 12 staff recently and were being forced to employ staff who were not trained midwives and unfamiliar with the ward process.
"We would like you to explicitly recognise the highly quality of skills, care and support of the midwives on the ward; their care and support was exceptional," she said.
"Without their dedication and compassion, our recovery from our loss would be much harder."
The inquiry was launched after midwives and staff at Canberra Hospital penned an anonymous letter to the government saying patients' lives were being put at risk due to understaffing and poor management.
It prompted women to come forward and share their experiences of giving birth at the hospital.
It has so far received 76 submissions.
Canberra Health Services CEO Bernadette McDonald said the hospital took full responsibility for a serious incident.
"This has been a very distressing time for the family. We have done all we can to provide support to the family and will continue to do so for as long as they need," she said.
"We immediately met with the family personally and apologised for this distressing event and offered our ongoing support.
"This family is still grieving, and we are mindful of them suffering more distress. This was also a distressing time for all staff involved, we will continue to support them."
Ms McDonald said the hospital made immediate changes after the incident to prevent such an event occurring again.
She said the hospital completed an extensive review, including input from an external expert.
"We will implement all changes recommended by that review," Ms McDonald said.
"Our thoughts and continued support are with the family and staff at this difficult time."