Deterministic light-induced spin squeezing in an atomic gas is limited by photon shot noise or, equivalently, by atomic state information escaping with the light field mediating the effective atomatom interaction. We show theoretically that the performance of cavity spin squeezing [M.H. Schleier-Smith, I.D. Leroux, and V. Vuletić, Phys. Rev. A 81, 021804(R) (2010)] can be substantially improved by erasing the light-atom entanglement, and propose several methods for doing so. Accounting for light scattering into free space, quantum erasure improves the scaling of cavity squeezing from S −1/2 to S −2/3 , where S is the total atomic spin.