playfirstogo.pngPlayFirst, the publisher of the popular online game, Diner Dash, has raised an eye-opening $16.5 million in its third round of financing.

The company stands out because it’s one of the first mainstream American online game publishers to embed micro-transactions, small payments for access to new game content, into its game. The marquee title, Diner Dash: Hometown Hero involves controlling a waitress who runs around a restaurant trying to keep her customers happy. PlayFirst offers one playable restaurant and a standard avatar for free, but to soup up your avatar or get access to new restaurants, you pay small bits of cash.

Until Hometown Hero, the only way to play Diner Dash games was to drop $20.

The company is also announcing a partnership with widget-maker RockYou, to distribute one of PlayFirst’s games on Facebook.

The micro-transactions move has paid off: The company says it has doubled its revenues since 2006 and that Hometown Hero is on track to outsell its predecessors by a significant margin. The forums are more active, and 50 percent of the transactions involving the game are micro-transactions of $5 and under.

With this investment, the company intends to accelerate development of new games, extend its reach into consoles like Nintendo DS and Xbox360, and expand into international markets, especially those in Asia. The partnership with RockYou gives the company access to the so-called “social graph,” but the implications of this aren’t clear, and even PlayFirst says it is not exactly sure where this will lead.

However, PlayFirst says it will be releasing a steady stream of apps each quarter, starting with simple game widgets and expanding into richer content, but declined to offer details.

DCM led the investment, and previous investors Mayfield Fund, Trinity Ventures, and Rustic Canyon Partners participated in the round. The company has now raised a total of $26.5 million.