We propose a new approach to study quantum phase transitions in low-dimensional lattice models. It is based on studying the von Neumann entropy of two neighboring central sites in a long chain. It is demonstrated that the procedure works equally well for fermionic and spin models, and the two-site entropy is a better indicator of quantum phase transition than calculating gaps, order parameters or the single-site entropy. The method is especially convenient when the density-matrix renormalization-group (DMRG) algorithm is used.PACS numbers: 71.10. Fd, 71.30.+h, 75.10.Jm The search for ground state and the study of quantum phase transitions (QPTs) is a challenging problem when strongly correlated fermionic or spin systems are considered. Since exactly solvable models are rare, in most cases the relevant part of the excitation spectrum, the order parameters characterizing the various phases, or eventually susceptibilities are determined numerically on finite chains and their thermodynamic limit is determined using the standard finite-size scaling method. Unfortunately in several cases no definite conclusions can be drawn even if the calculations are performed on rather long chains.In this letter, we propose a new approach to detect QPTs and to locate the quantum critical point in lowdimensional spin or fermionic models. It is based on studying the behavior of the von Neumann entropy of two neighboring sites in the middle of a long chain, which can be defined both for fermionic and spin models, and can be especially easily implemented when the densitymatrix renormalization-group (DMRG) algorithm [1] is used.The method is closely related to concepts in quantum information theory, which recently have attracted great attention in relation to QPTs. Wu et al. [2] have shown that quite generally QPTs are signalled by a discontinuity in some measure of entanglement in the quantum system. One such measure is the concurrence [3] which has been used by a number of authors [4,5,6,7,8,9,10] in their study of spin models. Since the concurrence is defined for spin-1/2 systems only, for higher spins or fermionic models another measure of entanglement is needed.The local measure of entanglement, the one-site entropy, which is obtained from the reduced density matrix ρ i at site i, has been proposed by Zanardi [11] and Gu et al.[12] to identify QPTs. Contrary to their expectation, in many cases, this quantity turns out to be insensitive to QPT. As an example let us consider the most general isotropic spin-1 chain model described by the HamiltonianIn 1D, the model can be solved exactly at θ = ±π/4 and θ = ±3π/4, and is known to have at least four different phases [13]. The ground state is ferromagnetic for θ < −3π/4 and θ > π/2, while in between the integrable points separate the Haldane phase, which exists in the range −π/4 < θ < π/4, from the dimerized and the quantum spin nematic phases, respectively. The existence of another phase, the quantum quadrupolar phase [14] near θ = −3π/4 is not settled yet [15]. These phases and the...