We propose an experimentally feasible method for enhancing the atom-field coupling as well as the ratio between this coupling and dissipation (i.e., cooperativity) in an optical cavity. It exploits optical parametric amplification to exponentially enhance the atom-cavity interaction and, hence, the cooperativity of the system, with the squeezing-induced noise being completely eliminated. Consequently, the atom-cavity system can be driven from the weak-coupling regime to the strong-coupling regime for modest squeezing parameters, and even can achieve an effective cooperativity much larger than 100. Based on this, we further demonstrate the generation of steady-state nearly maximal quantum entanglement. The resulting entanglement infidelity (which quantifies the deviation of the actual state from a maximally entangled state) is exponentially smaller than the lower bound on the infidelities obtained in other dissipative entanglement preparations without applying squeezing. In principle, we can make an arbitrarily small infidelity. Our generic method for enhancing atom-cavity interaction and cooperativities can be implemented in a wide range of physical systems, and it can provide diverse applications for quantum information processing.