Watson, a Jamaican international, will move from one Texas side to another, and he'll be joined by the veteran Brazilian fullback.
Watson, 29, spent the entirety of his professional career in the Jamaican Premier League with side Sporting Central Academy before signing with Houston in 2011. He played 41 games in his two seasons with La Naranja, scoring a goal and adding two assists while being a part of two MLS Cup finalist squads.
"I appreciate Je-Vaughn's contribution to the club over the past two seasons," Dynamo president Chris Canetti said in a team statement. "I believe this move is in the best interest for both parties. He can begin a new opportunity, and it clears up some roster space that will enable us to make additional moves."
The Dynamo publicly commented on its pursuit of Scottish winger Andrew Driver, saying that a multi-year deal for the Heart of Midlothian player was close to completion. Driver would be on loan until June when his contract expires and then permanently transfer to Houston, according to the Dynamo's official website.
As for Dallas, 31-year-old Michel Garbini Pereira came through the Atletico Mineiro system and played for a number of clubs in Brazil and Europe, including Standard Liege, where he was a teammate of U.S. international Oguchi Onyewu. Most recently, he played for Greek side Aris FC, along with MLS players Freddy Adu and Eddie Johnson and former MLS forward Carlos Ruiz.
"We’re very glad to have Michel joining FC Dallas," Dallas head coach Schellas Hyndman said in a team release. "We’ve liked him since our first day of preseason when he came in on trial. He’s a very good player with a very good resume. He plays on both sides of the ball and is a good distributor of the ball. I saw him play for Atlético Paranaense and for Aris out of Greece, so I’ve been familiar with him for a long time. He’s really happy to be here and we’re happy to have him. I think he’s going to add a lot to our defense."