According to MLSSoccer.com, Cruz had been locked in contract negotiations with the Dynamo since the end of the season.
A compromise seemed unlikely, so they are sending Cruz to Washington D.C. in exchange for partial allocation money, which will likely be used to sign a new player.
Cruz's 2011 base salary was $80,000 and he was projected to earn about $123,000. His contract with the Dynamo, signed when he was drafted in 2008, ended last year, so his salary was set to count toward Houston's salary cap in 2012.
Cruz was left exposed to the Montreal Impact in the Expansion Draft. The Impact opted for another Houston player -- forward Brian Ching -- and that's when contract negotiations began.
Cruz, a 22-year-old Virginia native, is entering his fourth year in MLS. In 2011, he missed five weeks with a quadriceps injury, but played in 20 of 34 regular season matches. He started in 13 of those, plus all four in the MLS Cup Playoffs.