Continuous variable entanglement and violation of Bell inequality for two modes are investigated in a three-level cascade atomic system. Entanglement of the system is demonstrated according to the entanglement criterion [Phys. Rev. Lett. 84 (2000) 2722]. Violation of Bell inequality is studied within the framework of a quantum theory of multiwave mixing. It is shown that there are some states that are entangled but do not violate the Bell inequality.