Because it is right on the road between Granada and Managua, Masaya gets a fair amount of traffic from both cities. Buses going in either direction will drop you off here for about half the normal fare. Be warned that they often won't enter the city proper, and you'll likely get dropped on the side of the highway. It's about a 30-minute walk to the center of town, or a $0.10 per person taxi ride.
The city's main bus station is located next to the Mercado Municipal, with frequent direct service to Managua and Granada. Buses to a number of other small towns in the region also leave from here. There's also a bus to Matagalpa that leaves every morning at 5:30 a.m.
TransNica has an office on Avenida Antiguo Teatro Gonzales, two blocks south of the train station, with daily service to San Jose (5 a.m., 7 a.m., and 10 a.m., $23) and Tegucigalpa (2 p.m., $28.75). The buses don't originate here, so you're best off booking the day before.