We present and analyze a new approach for the generation of atomic spin-squeezed states. Our method involves the collective coupling of an atomic ensemble to a decaying mode of an open optical cavity. We demonstrate the existence of a collective atomic dark state, decoupled from the radiation field. By explicitly constructing this state we find that it can feature spin squeezing bounded only by the Heisenberg limit. We show that such dark states can be deterministically prepared via dissipative means, thus turning dissipation into a resource for entanglement. The scaling of the phase sensitivity taking realistic imperfections into account is discussed.