The three men were arrested in Mbarara, 300 kilometres west of the capital Kampala, after holding the mock funeral procession despite police orders not to gather for a protest.
"The three carried a coffin with the inscription 'Rest in Peace, Museveni' and a portrait of the president", said Samson Kasasira, a regional police spokesman.
Kasasira said they had been denied police permission to hold a protest against a proposed consitutional amendment removing presidential age limits that would allow Museveni, now 72, to run for a sixth consecutive term in 2021.