The Central Criminal Court jury found Mary Prendergast of Glenna Cottages, Commons Road, Cork, not guilty by reason of insanity of murdering 21-year-old Jessica Prendergast at that address on 29 July 2006.
It took the jury of seven women and five men 24 minutes to reach its unanimous verdict.
Ms Prendergast, 49, who has been diagnosed with paranoid schizophrenia, wept as the verdict was read out.
Gardaí found Jessica covered in blood at the foot of the stairs. She had been stabbed 44 times.
Ms Prendergast has been committed to the Central Mental Hospital.
