The standard quantum limit bounds the precision of measurements that can be achieved by ensembles of uncorrelated particles. Fundamentally, this limit arises from the non-commuting nature of quantum mechanics, leading to the presence of fluctuations often referred to as quantum projection noise. Quantum metrology relies on the use of non-classical states of many-body systems to enhance the precision of measurements beyond the standard quantum limit. To do so, one can reshape the quantum projection noise-a strategy known as squeezing. In the context of many-body spin systems, one typically uses all-to-all interactions (for example, the one-axis twisting model) between the constituents to generate the structured entanglement characteristic of spin squeezing. Here we explore the prediction, motivated by recent theoretical work, that short-range interactions-and in particular, the two-dimensional dipolar XY model-can also enable the realization of scalable spin squeezing. Working with a dipolar Rydberg quantum simulator of up to N = 100 atoms, we demonstrate that quench dynamics from a polarized initial state lead to spin squeezing that improves with increasing system size up to a maximum of -3.5 ± 0.3 dB (before correcting for detection errors, or roughly -5 ± 0.3 dB after correction). Finally, we present two independent refinements: first, using a multistep spin-squeezing protocol allows us to further enhance the squeezing by roughly 1 dB, and second, leveraging Floquet engineering to realize Heisenberg interactions, we demonstrate the ability to extend the lifetime of the squeezed state by freezing its dynamics.