。
She held the baby tightly in both arms.
Literal
She [topic-は] baby [object-を] both-arms [in-に] held-tight.
抱きしめる (だきしめる) is a compound verb: 抱く (to hold/embrace) + しめる (to tighten/close) = 'to hold tightly, to hug.' 両腕 (りょううで) means 'both arms' — 両 is a prefix meaning 'both/double.' The に marks where the baby is held. This is a physically warm image of protective embrace.