For some weird reason, the authors of sendmail decided to control relaying somewhere else, probably because like most other features in sendmail, relay blocking was added as an afterthought. But enough ranting. Here's what you need to do:
Create a file "/etc/mail/relay-domains" with one entry per domain:
"mydomain.com RELAY"
"yourdomain.com RELAY"
Now use the makemap command to create a hash from that info:
"makemap hash access < access"
Intuitive huh? Finally, restart sendmail:
"service sendmail restart"