Three persons, including the owner of the boat, were arrested by Palghar police late this evening.
The police said 32 students had been rescued and a search for the missing ones was continuing, with Coast Guard personnel and local fishermen out at sea.
The bodies of the three girls -- Sonal Bhagwan Surati, Janhavi Harish Surati and Sanskruti Mayavanshi -- all aged 17, were recovered, Superintendent of Police, Palghar, Manjunath Singe told PTI.
The private boat 'Dahanu Queen' was carrying 40 students of the Ponda School and Junior College in Parnaka in Dahanu and capsized around 11.30 am, Singe said.
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"The Coast Guard has deployed its ships and aircraft in the rescue operation and personnel from several departments like the coastal police are involved in the search operations," the SP said.
The accident spot is around 20 miles off the Dahanu coast, a spokesperson of the Coast Guard said. Dahanu is located around 130 km from Mumbai.
Among the rescued, three students and the boat driver were admitted to a hospital, police said.
Local fishermen, who saw the mishap, and some residents of Dahanu joined in the rescue efforts.
Singe said the owner of the boat Dhiraj Ambire, boatman Parth Ambire and helper Mahendra Ambire were arrested late this evening.
"The trio was booked under IPC sections 304 A (culpable homicide not amounting to murder), 280 (rash navigation of vessel), 282 (conveying person by water for hire in unsafe or overloaded vessel), 34 (common intention). The case was registered at Dahanu police station," Singe said.
President Ram Nath Kovind, who arrived in Mumbai today on a two-day visit to Maharashtra, offered his condolences to the families of those killed in the tragedy.
"Anguished to hear of boat carrying school children capsizing in Dahanu, Maharashtra. State government has rescued most of the passengers and is making efforts to trace those still missing. My condolences to bereaved families," he tweeted.
The Coast Guard gave details about its rescue operation in a release here.
"On receiving the information, the Coast Guard Station at Dahanu immediately initiated search and rescue efforts whilst co-ordinating with local authorities. A Coast Guard boat based at Dahanu and a helicopter from Daman were released immediately for the rescue efforts," it said.
However, there have been three casualties in the incident, it said.
"Search efforts are still continuing at the location in coordination with local authorities," the release added.