We investigate the entanglement dynamics in a free-fermion chain initially prepared in a Fermi sea and subjected to localized losses (dissipative impurity). We derive a formula describing the dynamics of the entanglement entropies in the hydrodynamic limit of long times and large intervals. The result depends only on the absorption coefficient of the effective delta potential describing the impurity in the hydrodynamic limit. Genuine dissipation-induced entanglement is certified by the linear growth of the logarithmic negativity. Finally, in the quantum Zeno regime at strong dissipation the entanglement growth is arrested (Zeno entanglement death).