The incident in Mallan village took place when one faction led by Makhan Singh went to Gurdwara premises to take its "possession" which was resisted by the other faction led by Naib Singh, police said.
During the clash, members of both the factions fired several rounds at each other, police said.
"Three persons were killed in the firing," Muktsar SSP Gurpreet Singh Gill said, adding four others were injured.
Police said Makhan Singh had been performing 'sewa' at the Gurdwara in village Mallan for the last many years.
"Today, a group of over 100 people, led by Makhan Singh and local villagers went to Gurdwara to regain control over the temple which led to bloody clash between both factions," said police.
Senior officials of police including SSP visited the spot and the matter was being investigated.