Depressed mom lives with me now, her bitterness is hurting my children. What can I do?

I would come down hard on Mother and tell her Never speak to Your children in that way! You are supposed to protect your children from anyone trying to hurt them. Who is in charge here? Is there a decent man around?
Your daughter will Never Forget if you act like a wimp around your mother. She will make sure she is nothing like you when she grows up. She will not forget that you allowed your nasty witch of a mother to attempt to destroy her soul.
If she's anything like me--sensitive, observant, empathetic-- these are the facts.
Lay down the law or you lose a lot more than you know.

Please look at alternatives for her whether it be medication to calm her butt down or living elsewhere. If I could like ChristinaW's post a million times I would because she is 100% right. I had grandparents that bullied my mom with guilt, screaming, fits and later violent acting out. I had to live with that off and on for 15 years. Your daughter may come to a point when she is old enough that she will move out simply to get away from her home. When I was in college, even though I lived at home, I stayed as long on campus as I possibly could until it was time to go to work to avoid everything. When my mom found out, she hit the roof and told my grandmother she was going to have to change. It was one of the first times I seen my mom stand up like that.
Belive me, depending on the person however, those screaming matches only last for so long until they are right back to their old selves. I had some money saved from work and told my mom I was moving out. My grandmother finally went back home to her husband where she should have been.
Don't lose your daughter through this. When your mom is long gone, your daughter and possibly your future grandchildren will be in your life. My mother did everything but lay down her life for her parents and it was never appreciated. If something doesn't change, your daughter will only grow to resent her grandmother and that is some sad baggage to carry around. I know.

Mom needs treated for depression, and some of her nastiness and always saying how you want her gone is her way of warding off that deep fear that you want her gone. Can you possibly communicate that, "Mom, I don't want you gone, I want you to stop lashing out at me and my daughter? You may have a lot to be upset about, but if you keep dumping it o us instead of a good therapist, we WILL have to find other living arrangements? We will take care to find something ice, and maybe that would be better for you too." And start looking. The truth is if you cannot help Mom to have any perspective, if she refuses to get any help with her depression or behavior (does she?) and you have to choose between your daughter and your mother, you in fact need to choose your daughter. It may be that if Mom sees that moving her out is a real possibility instead of just a negative obsessive accusation, she would find reason to try to be a decent human being again despite what has happened to her, instead of just wallowing in negativism and self pity, and it would be good for all of you.

Thanks, Joycews:) When I read posts here about ignorance, narcissism, belittling of children, I cannot contain myself. It hurts so bad imagining another child is being mistreated. Someone must speak up and protect them. Sure it's a stretch for some to step out in warrior mode, but that is what life lessons are for: to grow.
It is a fantastic thing to overcome fears and weak behaviors, to conquer monsters.

My mother did the same types of behavior. It became horrible when she lived with me. It was like turning on a nasty switch the day she moved in. She needed help from me, but she wanted to control me, my teenage sons and my husband. It turned out that she had mental illness that had reared its head. My mom had borderline personality disorder. Take your mom to be evaluated. Talk to her dr ahead of time. If she hears your concerns about her mental status, it will probably make her mad at you. Depression is also a big part. Get help for her. My mother had to move out. She was getting physical against me for not making her "happy". Never did figure out what made her happy. Take care of yourself and family.

There has been many a blow up when it comes to me defending my kids or my home or myself. She pouts and acts like a brat for a week or so then it's all better, until next time. It's a vicious cycle. They do see me stand up to her, and they see her for who she is. They used to be very close to grandma. It sucks to see that diminish.

Please do something soon to protect your daughter. My mom was much like yours. She NEVER lived with us, I wouldn't allow her. She always had it in for me and then my daughter. We both stood up to her but just seeing and hearing my mom was too much. My mother died two years ago and we have NO fond memories of her. She was toxic. She tried to destroy us. Her attempts are not forgotten just because she's gone. The sooner your daughter gets away from her grandmother the better. And I think this could apply to you too, I'm sorry to say.

Thank you so much for your responses. She has refused professional help over and over again, but I do think I am going to have to bring it up again. I have shared with her with reassuring and loving words that I would like for things to work out. I have really tried so hard to make her feel like she is welcome. One wrong word and the poop hits the fan. We can't possibly afford for her to live anywhere, she has a disability check and that's it. She needs help, I am going to try to figure out another way to gently nudge her to consider it again.