The Dynamo were in strong position to claim their second consecutive title at the Mobile Mini Sun Cup Saturday night but ultimately came up short.
The New England Revolution defeated the Dynamo, 4-3, on penalties to win the championship game in Tucson, Ariz.
The teams tied, 1-1, in regulation with both goals coming in the second half.
New England scored the opener less than two minutes after halftime when Krisztian Nemeth hit home the rebound of a shot that hit the post.
The Dynamo pulled level in the 63rd minute when Alberth Elis converted a penalty kick.