Iddy Pierre-Canel was on a flight from Baltimore to Tucson, Arizona, with the ashes of her dead daughter which was then lost, NBCaffiliate KPNX TV reported.
Ms Pierre-Canel said her 28-year-old-daughter, Carm-Idrelle Casseus, died after a battle with certain medical problems.
She said that an American Airlines employee insisted more than once that she check in her bag containing the ashes, while waiting at the check-in gate on March 5, 2016.
She was quoted saying that she had made it clear to the staff that she was carrying the ashes of her daughter and that she wanted to keep it close to her.
"When the plane took off, that's when I realised I didn't have my bag. They said, 'Oh, they checked your bag in,' a member of the crew said.
Ms Canel said she remembers an employee picking her bags up, but was was under the impression that they were helping her take the bags to her seat since she was distraught.
Her attorney, Lorraine Morey said her client was promised that her bags would be the first to be off the plane. However, when she arrived at Tucson, her bag was nowhere to be found.
The airline returned Ms Pierre-Canel's suitcase 19 days after losing it, but the ashes were not inside the bag.
American Airlines released a statement regarding the incident, saying, "When we need customers to gate check a bag, we always ask for customers to remove all valuables and important documents. Had we known there were cremated ashes in the bag, we would have had her remove them or found a place for the bag."
"We apologised for losing the items and certainly are very sorry for her terrible loss. A spokesperson for the airline also said Ms Pierre-Canel created an itemised list of what was in that bag," the statement said.
There was an estimated USD 24,000 worth of belongings in the suitcase, but none of it were mentioned on that list.
Attorney Morey explained stating that it was because there was no way to assign a dollar value to her daughter's remains.
The lawsuit, filed on March 17 is for USD 10 million, the report said.
This is the second lawsuit in two weeks. Last week, American Airlines faced another passenger lawsuit when Australian Michael Anthony Taylor, filed a lawsuit seeking 100,000 dollars for damages, claiming that he was crushed by two overweight passengers on either side of him on an American Airline flight.
(With inputs from PTI)