Isabella, 18, and Connor, 15, live in America with Cruise, his wife Katie Holmes and their four-year-old daughter Suri, but Nicole said that she has to respect and accept their decision.
She told Hello! Magazine, 'They live with Tom, which was their choice. I'd love them to live with us, but what can you do?'
The actress welcomed daughter Sunday Rose with new husband Keith Urban in July 2008, and said she was named after their favourite day of the week.
'When we were both alone, before we met each other, Sunday was the day we dreaded most, because when you don't have someone in your life Sundays can be really lonely,' she explained.
'Then when we met, we went from dreading Sunday to really loving it. It was the day when nobody was going to bother you, you could stay in bed, you could do what you wanted to do. We just thought, 'What a great name for our baby!'
'It's a beautiful thing at 43 to have a two-and-a-half year old.'