Strong electron and spin correlations in a double quantum dot (DQD) can give rise to different quantum states. We observe a continuous transition from a Kondo state exhibiting a single-peak Kondo resonance to another exhibiting a double peak by increasing the interdot coupling (t) in a parallel-coupled DQD. The transition into the double-peak state provides evidence for spin entanglement between the excess electrons on each dot. Toward the transition, the peak splitting merges and becomes substantially smaller than t because of strong Coulomb effects. Our device tunability bodes well for future quantum computation applications.