"It's true and we are working on that," Settle told PEOPLE at Tuesday's G-Star Raw runway fashion show in New York. "Things happen in life and you just have to roll with it. I wish things could have been better but our focus is on our daughter."
Meanwhile, a source confirmed to PEOPLE, "They have been separated for a while now," and legal proceedings are still underway and no divorce papers between Settle, 40, and Nativ, 26, have been filed yet.
The couple, who lived together in Manhattan, where Settle was based for his role as family patriarch on Gossip Girl, welcomed a daughter, Aven Angelica Settle, last March.
Despite the family strife, "the baby is doing great," said the source. And Settle continues to play an active role in his little girl's upbringing. "Both parents are devoted to their child," adds the source. "Aven is still a part of Matthew's everyday life."
A rep for the actor declined to comment.