Entanglement lies at the heart of quantum mechanics, and in recent years has been identified as an essential resource for quantum information processing and computation. The experimentally challenging production of highly entangled multi-particle states is therefore important for investigating both fundamental physics and practical applications. Here we report the creation of highly entangled states of neutral atoms trapped in the periodic potential of an optical lattice. Controlled collisions between individual neighbouring atoms are used to realize an array of quantum gates, with massively parallel operation. We observe a coherent entangling-disentangling evolution in the many-body system, depending on the phase shift acquired during the collision between neighbouring atoms. Such dynamics are indicative of highly entangled many-body states; moreover, these are formed in a single operational step, independent of the size of the system.