Cruz was born to Tina and Nilo Cruz, Sr. in Matanzas, Cuba. The family immigrated to the "Little Havana" in Miami, Florida in 1970 on a Freedom Flight, and eventually naturalised to the United States. His interest in theater began with acting and directing in the early 1980s. He studied theater first at Miami-Dade Community College, later moving to New York City, where Cruz studied under fellow Cuban María Irene Fornés. Fornes recommended Cruz to Paula Vogel who was teaching at Brown University where he would later receive his M.F.A. in 1994.

In 2001, he served as the playwright-in-residence for the New Theatre in Coral Gables, Florida, where he wrote Anna in the Tropics, winner of the 2003 Pulitzer and the Steinberg Award for Best New Play. A year later it received its Broadway premiere with Jimmy Smitts in the lead role. He also has a sister named Clara Cruz who works as a Spanish teacher in Hialeah Gardens Elementary School in Hialeah, Florida.

Some of the theatres that have developed and performed his works include New York’s Public Theater, New York Theatre Workshop, Pasadena Playhouse, McCarter Theatre, Oregon Shakespeare Festival, South Coast Repertory, The Alliance, New Theatre, Florida Stage and the Coconut Grove Playhouse.

Cruz wrote the book of the Frank Wildhorn/Jack Murphy musical Havana. Its scheduled world premiere at the Pasadena Playhouse has been delayed by the theatre's declaration of bankruptcy in 2010.

Cruz has been the recipient of numerous awards and fellowships, including two NEA/TCG National Theatre Artist Residency grants, a Rockefeller Foundation grant, San Francisco's W. Alton Jones award and a Kennedy Center Fund for New American Plays award.

Cruz is an alumnus of New Dramatists, has taught playwriting at Brown University, the University of Iowa and at Yale University. He presently lives in New York City.