The winning play started when David Beckham flicked a header to Robbie Keane. The Irish player then sent a through ball to Donovan, who touched it over Houston goalkeeper Talley Hall and into the net.
Los Angeles claimed the third championship in franchise history thanks to Donovan's fourth goal in an MLS Cup final. The Galaxy had also won the MLS Supporters' Shield, indicative of the league's best record.
They finished the season undefeated at home, going 15-0-5 at The Home Depot Center.
Houston's first-ever loss in an MLS Cup final snapped a nine-game unbeaten streak.
The Dynamo had also played in championship games in 2006 and 2007, winning them both under head Coach Dominic Kinnear.