<p>The generation of quantum entanglement is important for a wide range of quantum technology protocols. In nanophotonics, a promising platform for quantum technologies, entanglement generation via plasmon-mediated coupling in quantum dot qubits is often modeled within the dipole limit, where only dipolar plasmons of the mediating nanoparticle are considered, and the local response approximation, where nonlocal corrections are ignored. However, multipolar effects manifest strongly at coupling distances less than the nanoparticle size, while nonlocal optical effects stem from a size-induced dielectric response. We investigated these two important effects in the generation of two-qubit entanglement mediated by plasmonic coupling. A cavity quantum electrodynamic approach is employed, where the induced plasmonic effects lead to modified transition rates in the dynamics of the coupled quantum dot qubits. We find that multipolar modes and size-dependent damping lead to entanglement decay at small coupling distances and limit mediated entanglement with certain particle sizes. We discuss potential implications of multipolar modes in entanglement-based quantum sensing.</p>