Site-occupation embedding theory (SOET) is a density functional theory (DFT)-based method which aims at modelling strongly correlated electrons. It is in principle exact and applicable to model and quantum chemical Hamiltonians. The theory is presented here for the Hubbard Hamiltonian. In contrast to conventional DFT approaches, the site (or orbital) occupations are deduced in SOET from a partially interacting system consisting of one (or more) impurity site(s) and non-interacting bath sites. The correlation energy of the bath is then treated implicitly by means of a site-occupation functional. In this work, we propose a simple impurity-occupation functional approximation based on the two-level (2L) Hubbard model which is referred to as two-level impurity local density approximation (2L-ILDA). Results obtained on a prototypical uniform eight-site Hubbard ring are promising. The extension of the method to larger systems and more sophisticated model Hamiltonians is currently in progress.