Tiger Global Management also participated in the Series C round, Square said on Tuesday.
Square plans to use the money to accelerate its growth, said Dorsey, the company's chief executive.
Mary Meeker, a partner at Kleiner Perkins, is joining the board, which also includes former U.S. Treasury Secretary Lawrence Summers.
Square's technology lets people use their mobile phones to accept credit card payments from other people. In April, Square said Visa invested an undisclosed sum in the company.
The San Francisco-based company has plenty of competitors eager to get into mobile payments. Google in May debuted a digital wallet that lets people to use their smartphones to pay for clothing, food and other items.