Baby Chao are Chao that have yet not evolved. Unlike adult Chao, they can't breed. Also, they will act more "childish" than adult Chao. Strangely, newborns won't be as upset if they are attacked.
Like adult Chao, a Baby Chao's appearance will vary depending on their stats and if they are treated well by Hero or Dark characters, although to a greater extent. For example, if a Baby Chao is treated well by Rouge, it will greatly resemble a Dark Chao, even though it is still a Baby Chao. Another example is that if a Baby Chao is given many Green Chaos Drives, it will start to develop the attributes the Running Chao has.
Baby Chao will become either a Hero, Neutral, or Dark Chao depending on how it is treated by which characters when it evolves. What type of Chao it becomes also depends on its stats at the time of evolution.