Hi, it is neither one. A daughter-in-law is the wife of your son.
In general, the suffix "-in-law" indicates a non-blood relative acquired through marriage. So, she is your daughter-in-law, you are her father-in-law. The wife of your brother, or a sister of your wife, would be your sister-in-law. The husband of your sister, or the brother of your wife, would be a brother-in-law, etc.
An interesting note that many native speakers get wrong: to make the plural of these terms, you make the FIRST word plural. So, for example, "I have five sisters-in-law" (NOT "I have five sister-in-laws").
I hope this helps.