Porter, 38, took over a team that was 8-16-10 a year ago and began a turnaround that resulted in a 14-5-15 record and a Western Conference-best 57 points. The Timbers advanced to the Western Conference finals against Real Salt Lake this season.
Portland set team records with points, goals (54) and fewest goals allowed (33).
The Timbers were 11-1-5 at home this season, posting 11 shutouts at Jeld-Wen Field.
Portland, which was granted an MLS franchise in 2009, reached the playoffs for the first time in 2013.
Prior to coaching the Portland Timbers, Porter spent seven seasons coaching on the collegiate level at Akron, taking the Zips to seven consecutive Mid-American Conference titles and six NCAA tournament berths. Akron won the 2010 NCAA men's soccer title and lost in the finals in 2009.
The MLS Coach of the Year Award is decided in a vote of team personnel, media and MLS players. New York's Mike Petke finished second and Real Salt Lake's Jason Kreis was third.