A convenient way of dealing with image sets is to represent them as points on Grassmannian manifolds. While several recent studies explored the applicability of discriminant analysis on such manifolds, the conventional formalism of discriminant analysis suffers from not considering the local structure of the data. We propose a discriminant analysis approach on Grassmannian manifolds, based on a graph-embedding framework. We show that by introducing within-class and between-class similarity graphs to characterise intra-class compactness and inter-class separability, the geometrical structure of data can be exploited. Experiments on several image datasets (PIE, BANCA, MoBo, ETH-80) show that the proposed algorithm obtains considerable improvements in discrimination accuracy, in comparison to three recent methods: Grassmann Discriminant Analysis (GDA), Kernel GDA, and the kernel version of Affine Hull Image Set Distance. We further propose a Grassmannian kernel, based on canonical correlation between subspaces, which can increase discrimination accuracy when used in combination with previous Grassmannian kernels.