A 72-year-old US grandmother is having an incestuous affair with her own grandson and the pair are set to have a baby.

Pearl Carter, from Indiana, shocked family and friends after beginning a bizarre relationship with her 26-year-old grandchild Phil Bailey, The Sun reported.

She is now using her pension to pay $54,000 to a surrogate mother so they can have a child, said reports in New Zealand's New Idea magazine.

"I'm not interested in anyone else's opinion. I am in love with Phil and he's in love with me," Carter said. "Soon I'll be holding my son or daughter in my arms and Phil will be the proud dad."

Bailey is the son of Pearl's daughter Lynette Bailey - who the senior citizen put up for adoption when she was just 18.

When Lynette Bailey died in 2006, Phil Bailey tracked down his long-lost grandma - 46 years his senior - and they started their strange relationship.

"From the first moment that I saw him, I knew we would never have a grandmother-grandson relationship. For the first time in years I felt sexually alive," Carter said.

Bailey claimed he had the same feelings.

"I wanted to kiss her there and then. My feelings were overwhelming," he said.

"I love Pearl with all my heart. I've always been attracted to older women and I think Pearl is gorgeous. Now I'm going to be a dad and I can't wait.

"Yes, we get laughed at and bullied when we go out and kiss in public but we don't care. You can't help who you fall for."

Read more at The Sun.