"They have both chosen to pursue creative and artistic fields and are doing brilliantly," the actress said in a new interview with Australian Women's Weekly. "However, more importantly, I am proud of the people that they have become.
Connor Cruise opens up on relationship with Nicole Kidman: 'I love my mum'
"They are generous, kind and hardworking, and these are traits that I love to see in my children."
Connor, 19, is currently working as a DJ and an actor, while Isabella, 21, is attending art school in London.
The Oscar winner has always been very open about how important her family is to her, and often shares insights into her home life with husband Keith Urban and their two little girls, Sunday Rose and Faith Margaret.
She told the magazine that if she had to choose between her career and her loved ones, there would be no contest.
"If it were a choice between my family and Keith, and my career, I wouldn't even bat an eyelid," she said. "The most important things to me are the love of our relationship and my children.
Nicole Kidman also has two daughters with second husband Keith Urban; Sunday Rose and Faith Margaret
"At this stage of my life, and with time being so precious, the joy I get from us as a family far outweighs any joy in any other area in my life, by far."
In the interview, Nicole also spoke about her fears at playing Grace Kelly, and admitted that the criticism her best friend Naomi Watts received playing another real-life princess gave her pause for thought.
"Of course I get nervous," she said. "But I have played Virginia Woolfe and come up against literary people too. Naomi makes her own choices, and I make mine. We didn't plan on making princess movies at the same time.
"Obviously playing Diana is closer to the bone because it's still recent. However, with Grace, there's an entire generation that knows she was an amazing woman and a princess but perhaps don't really know much more and I hope this film will fill in some of the blanks."
Nicole has recently returned from the Cannes Film Festival, where she had to defend Grace of Monaco, which premiered as the opening film.
The movie has been dismissed by Grace Kelly’s son Prince Albert of Monaco and his sisters Princess Stephanie and Princess Caroline as "needlessly glamourised" and "historically inaccurate".
"I get why the children are upset," Nicole said at a press conference. "I have great respect and regard for their mother. It's not meant to be a biopic.
"I certainly did my best to honour everything that was real and truthful in it."