What is the meaning of entanglement in a theory of extended objects such as strings? To address this question we consider the spatial entanglement between two intervals in the Gross-Taylor model, the string theory dual to two-dimensional Yang-Mills theory at large N. The string diagrams that contribute to the entanglement entropy describe open strings with endpoints anchored to the entangling surface, as first argued by Susskind. We develop a canonical theory of these open strings, and describe how closed strings are divided into open strings at the level of the Hilbert space. We derive the Modular hamiltonian for the Hartle-Hawking state and show that the corresponding reduced density matrix describes a thermal ensemble of open strings ending on an object at the entangling surface that we call an E-brane.