The decision was taken at a cabinet meeting.
The three subsidised cylinders will be in addition to the six cylinders to be provided by the Centre.
The central government has put a cap on the number of subsidised cylinders at six.
Congress had asked its state governments to provide three additional subsidised cylinders as a relief to the common man.
There was a lot of debate on who should benefit from the subsidies. If the subsidies were to cover all sections of the society, the burden on the state exchequer would have been Rs 2,400 crore per year, state government had said.
A war of words had broken out between the ruling Congress and NCP over the delay in taking the decision.
NCP blamed Chief Minister Prithviraj Chavan, while Chavan pointed out that Food and Civil Supplies department was with NCP, as was the Finance Department.