Mr Cruz criticised Mr O’Rourke for past votes supporting a never-enacted oil production tax, which could have hit the oil-rich state hard, when the pair faced off on Tuesday.
However, Mr O’Rourke responded by reviving the “Lyin’ Ted” moniker Donald Trump devised for Mr Cruz during the 2016 Republican presidential primaries.
“Senator Cruz is not going to be honest with you. He's going to make up positions and votes that I've never held,” the Democratic candidate said.
“It's why the president called him Lyin' Ted and it’s why the nickname stuck because it's true.”
Mr Cruz, a former Ivy League debate champion, shot back: “It's clear Congressman O'Rourke's pollsters have told him to come out on the attack.”
Democrats have long set their sights on Texas, hoping its growing Hispanic population will help them turn the state blue.
Polls earlier in the campaign suggested Mr O’Rourke was close to causing a huge upset in the traditionally red state. However, the same polling now suggests Mr Cruz has pulled ahead.
No Democrat has won any of Texas's nearly 30 statewide offices since 1994, the US's longest political losing streak.
Tuesday’s second and likely final debate of the race appeared to be Mr O’Rourke’s last opportunity to turn the tide in his favour.
Mr Cruz kept his rival on the defensive when they debated last month in Dallas and Mr O'Rourke, who had campaigned on a message of unity for months, sharpened his tone in their second meeting.
The pair used this match-up to clash on abortion regulations, climate change, the nomination of Brett Kavanaugh to the Supreme Court and a border wall backed by the Trump administration.
The borrowed “Lyin’ Ted” line was the only name calling of the evening, with both candidates choosing to attack each other on their records.
When Mr O'Rourke said he wanted to expand federally funded health care to more Americans, Mr Cruz replied the congressman supported socialised medicine that would cost trillions and require sky-high tax increases.
Mr O'Rourke then accused Mr Cruz of not doing enough to stand up to the president when it came to Russia, claiming Texas needed a “full-time senator” rather than someone focussed on running for president.
Even though Mr Cruz appears to be in a better position than earlier in the race, the president will stage a rally next week at 8,000-seat Houston arena in a bid to sure up support for the Republican.
Mr Trump carried Texas by a relatively small nine points in 2016.
However, Mr Cruz has been a full-throated supporter of Mr Trump since they battled during the presidential race and hopes that the joint appearance will reassure Texas conservatives who were angered by the past animosity.
Additional reporting by AP