Congratulations on her baby! We had a baby last year, and we live in a one bedroom apartment so space is pretty tight. We don't even have a closet here! What I did was consolidate hubby's clothes and mine to clear out a couple drawers for the baby, one for her clothes and one for bedding. It's a good excuse to have a clear out and decide what clothes you wear and which ones you can give away.
I bought some of those small plastic chests of drawers to store her diapers and odds and ends. Under-bed storage also comes in handy. Fortunately baby clothes are small and don't take up a lot of space. One of those hanging sweater organizers for the closet would be a handy way to organize things, too.
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