The three men hail from Kishtwar district of Jammu region, police said, adding two pistols, two magazines, 20 rounds, four grenades, a wireless set and a packet of explosive substance were recovered from them.
"Police has busted a Hizbul Mujahideen module by arresting its three members in Bemina area of the city this afternoon," a police spokesman said.
A police party during Naka checking at Bemina Bypass Crossing apprehended three suspects identified as Reyaz Ahmad Wani, Ikhlaq Ahmad Khanday and Tawseeul-Nabi hailing from Kishtwar district, he said.
Police has registered a case under the Arms Act and the Explosive Substances Act against these militants, the spokesman said.
Further investigation is underway.