This article presents a proposal for preparing photon pairs in states that are entangled in their spatial modes. The method allows the encoding of any pair of spatial modes that is desired, without restrictions; a procedure that up to now has been elusive. This method consists of three steps: preparing photon pairs in polarization-entangled states, filtering the spatial mode, and use of polarization interferometers with diffractive mode-encoding elements to effect entanglement swapping between polarization and spatial modes. An extension of the method consists of entangling polarization and spatial mode, allowing the preparation of a 4-qubit cluster state of two photons. © 2012 Copyright Society of Photo-Optical Instrumentation Engineers (SPIE).