A. Since there is no apparent reason for your daughter's rejection of her grandmother, your best course of action is probably a spell of not letting your mom hold the baby, combined with a bit of experimentation to see if you can identify a cause for the behavior.
While this does mean temporarily denying your mother the privilege of holding her grandchild, keep in mind that watching the baby cry every time she holds her can't be much of a pleasure either. Continue to see your mom as frequently as you always have, but don't hand your daughter over to her for the next several visits. Spend the time as you normally do, chatting and going about your business.
The more your baby sees you interacting comfortably and happily with your mom, the more relaxed she will become in her presence. This is because of a phenomenon called "social referencing," which simply means that your baby looks to you for cues as to how to respond to people. Although your daughter has seen you and grandma together for a year now, she may have picked up on your anxiety about how she responds to your mother (and your mom may also be feeling anxious), which only serves to make your daughter more worried, too. If you take that issue out of the picture, everyone may feel more relaxed.
Besides your efforts to ease the pressure on your daughter, her own increasing mobility -- and upright view of the world -- can help the situation. After a few weeks of the hands-off approach, your mom might arrive one day and start to play with a new and very appealing toy, but without calling to the baby directly. Your daughter's curiosity will likely get the best of her, and she may cautiously approach her grandmother. Tempting as it may be to grab her and cuddle her, your mom should remain calm and simply talk with her, engaging her with discussion about the new toy. Even though this may not satisfy your mom's snuggle urge, it does represent the beginnings of a relationship (which may eventually lead to snuggles anyway). If your daughter doesn't take the bait, the two of you should wait a few weeks and try again.
By allowing your daughter to take the initiative in approaching your mother, you place her in control of the relationship. It also may reduce any fears that could have been developing -- sometimes, when an adult tries too hard to hold a baby, the baby gets scared that the adult can't or won't read her signals. By backing off, your mom is saying to your daughter that she understands her and will engage her when she's ready.
Remember, however, that mobility is a double-edged sword, and the skill that brings your daughter to your mother can also help her to flee. Furthermore, her desire to exercise her newfound skills will make her unlikely to want to be held by anyone. She may be willing to allow your mother to hold her hand as she goes on strolls, but if she balks, don't force her.
You can also make sure there is nothing that your mom is doing, albeit inadvertently, to turn your daughter off. She may wear a perfume that irritates your daughter's nose, or have a pendant that scares or hurts her. She may favor fabrics that bother the baby's skin, or wear glasses that make it hard for your daughter to see her eyes. Try to look at your mother from the perspective of a baby or toddler, and think about the ways in which she may be different from others with whom your child does not cry.
Finally, tell your mom not to take it personally. Young children have fears that we cannot always predict or explain (such as when my own son would burst into terrified tears at the sight of large men with long hair). If your mother continues to be a steady, calm presence, available for your daughter to approach at her own pace, your daughter will grow to know her and trust her.