We show that two qubits can be entangled by local interactions with an entangled two-mode continuous variable state. This is illustrated by the evolution of two two-level atoms interacting with a two-mode squeezed state. Two modes of the squeezed field are injected respectively into two spatially separate cavities and the atoms are then sent into the cavities to resonantly interact with the cavity field. We find that the atoms may be entangled even by a two-mode squeezed state which has been decohered while penetrating into the cavity.