ActingNormal, your post (that I've cut and pasted below) is just exactly the circumstances and how I felt when I had DS. It was a terrible time for me and for my MIL who really couldn't handle that I wanted be the mother to my baby and chose not to wean him at 4 months or use formula.
I think the posters on here who have said, "Snap out of it," are really showing a lack of understanding and totally unconstructive in their approach to the OP. Well done!
To the OP, you know, this feeling will get better and will lessen. Your DD will get bigger and will seem less vulnerable. You will feel less vulnerable too. I promise.
Having a baby is a momentous thing and unfortunately, not all of us automatically and immediately feel the same way about relatives and our DCs.
Your MIL obviously represents something to you that you don't like. Do you feel that your DP is quite deferential to her? Do you feel like you have no say when she's around?
You need to take back charge. It will make you feel a lot better and will improve your relationship with your MIL too. Think of ways that you could tolerate your MIL holding your DD. Perhaps when you prepare her meal. That way it's for a limited time. Or when you have a shower. Again, for a limited time.
In a sense, you must assert yourself and let MIL know that you are DD's mother, not someone to be dismissed and that you are the decision maker along with your DP. Once you feel you have got this into your MIL's mind, you will not feel the anxiety and panic that you are currently feeling. It's a terrible time and awful to be feeling this way. I know exactly what you're going through.
Meanwhile, it's quite important that you try and get some romance back into your life with your DP. It's normal for things to have gone a bit flat after having a baby and it takes a lot of effort to get any spark back. But it is possible. And it is important. It will make you feel loved, alive and cherished.
Bear up and I hope things go really well for you and your DD and your DP.
"My MIL also feels desperate to be needed and in charge, even more. She still treats her adult sons as children and encourages them to think they can't do things for themselves and need her to do it for them. When I had children, she seemed to struggle with not being the No 1 Mummy any more and tried to interfere and take charge and force herself into an important needed role.
I was scared they would take over and take my baby (emotionally) away from me. I knew I would be nervous about my ability to form a bond with my baby and would need time and space to do it and didn't want overconfident people marching in taking the baby off me (in a let me have a go I'll get him/her to stop crying kind of way, or a don't do it like that, I'll show you how it's done kind of way) and making me feel rubbish at it. The mother's bond with the baby is the MOST important thing and should not be interfered with so people need to be aware of giving the mother space."