The group of terrorists was attempting to infiltrate into the Indian territory from Pakistan-occupied Kashmir, a Defence Spokesman said in Srinagar.
The troops spotted and traced their movement in Saujian area of Poonch and kept tightening the cordon around them, leaving no escape route, he added.
A massive search operation was on for 36 hours which led to exchange of fire resulting in all the three terrorists being killed, he said.
The spokesman described it as a "flawless surgical operation" executed by the army ensuring neutralisation of all the terrorists and no casualty on their side.