Colorado received the second of Dallas' two first-round picks in the 2015 MLS SuperDraft, allocation money, and a contract buyout as compensation for the hiring.
"It was a difficult decision to leave the Rapids, but the team is in good hands," Pareja said.
Pareja had a 25-30-13 record with Colorado.
"The compensation we've received for Dallas will help us this season and beyond, and we are eager to find the right candidate to take our head coaching position," Rapids President Tim Hinchey said. "We want to credit Oscar for his role in helping develop our team in the last two years."
The Colombian had 13 goals and 47 assists in eight seasons for FC Dallas, and spent the next two years with the team as an assistant coach. After a stint with the U.S. under-17 team, he rejoined FC Dallas in 2008 as director of player development for the club's youth system. In 2011, Pareja also served as an assistant coach and directed the team's reserve squad.
"We couldn't be happier to be bringing Oscar home to Dallas," said Dan Hunt, vice president of Hunt Sports Group. "Oscar has been part of our FC Dallas family for more than 10 years and helped shape our youth development and academy programs into what they are today. We couldn't imagine a better fit for our professional team and our goal of building a championship club.