A teenaged boy also died due to pellet injuries during clashes between protesters and security forces near the encounter site.
Security forces launched a cordon and search operation in Gulab Bagh area of Tral after receiving specific inputs about the presence of militants there, a police official said.
As the forces were conducting the search operation, the hiding militants fired on them, resulting in an encounter, the official said.
They were identified as Zahid Ahmad Bhat, Ishfaq Bhat and Mohammad Ashraf Dar.
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A 16-year-old boy died after suffering pellet injuries near the encounter site during clashes between protesters and security forces.
Mohammad Younis was brought to SMHS hospital here with critical pellet injuries in the chest, the official said, adding, the boy succumbed to injuries at the hospital.
The security officials said the group affiliation of the slain militants was being ascertained.
However, Hizbul Mujahideen claimed that the trio were on their way to rejoin the ranks of the outfit after being associated with so-called Ansar Gazwatul Hind for sometime.
The spokesperson said the doors of Hizbul Mujahideen were always open for militants who are part of Ansar Gazwatul Hind.
Ansar Gazwatul Hind headed by Musa has been created to divide the Kashmiri nation, he claimed.
"We will issue a detailed statement in this regard and will also expose the elements behind this conspiracy," he added.
Musa recently left the Hizbul Mujahideen and was said to be in touch with other terror organisations.