It is stated several times throughout television episodes, novels, comics, short stories and audios that Time Lords reproduce by way of a father and a mother. (In other words, the same way human beings do.) As just a few of many examples: The Doctor speaks about his father, and about being a boy groiwng up, in "The Time Monster". The Doctor mentions his mother in "Doctor Who", the 1996 TV movie. The Master speaks about when the Doctor and he were boys, and about his father, in "The Sound of Drums". We see the Doctor's cot in "A Good Man Goes to War". Various Time Lords make reference to their mother, father, parents, grandfather, uncle etc.
However the novel "Lungbarrow" (novel) suggests that Time Lords reproduce using looms.