An Interior Ministry spokesman said two armed men were killed and a third gave himself up to security forces on Tuesday.
Saudi security forces said earlier on Tuesday they had killed two of the most wanted insurgents in the country.
Al-Arabiya television said Abd al-Karim al-Mijatti and Saud Humud al-Utaibi, who were both on a list of 26 most wanted suspects in Saudi Arabia, had been killed in the northern town of al-Ras in al-Qassim region, 350km northwest of the Saudi capital Riyadh.
However, this has not been independently verified.
Riyadh alleges that al-Mijjati, a Moroccan, had links to bombings in Casablanca in May 2003 and last year's Madrid train bombings.
The estimate of Saudi security
casualties varies from 15 to 51
Aljazeera said insurgents hurled grenades at police from their hideout late on Sunday.
A ministry statement said another insurgent was critically wounded and a number of members of the security forces were injured, although most had been released from hospital.
Security forces are continuing mop-up operations at the site of one of the longest and bloodiest battles in Saudi Arabia's two-year confrontation with al-Qaida supporters.
Saudi journalist Zuhair al-Harithi told Aljazeera from Jedda that if reports of al-Qaida leaders being killed in the shootout were confirmed, it would be "one of the biggest and most significant operations Saudi forces have ever carried out".
"I believe that the surrounded building hosted al-Qaida leaders, such as Salih al-Aufi and Talib al-Talib, who were reported to be killed during the clashes on Monday," he said.
Al-Harithi predicted the fighting would come to an end on Tuesday.
"Saudi security forces should have had genuine reasons to carry out the operation for three consecutive days.
"The clashes are taking place in a residential area, and security forces want to secure safety of the citizens as they deal with this incident," he said.
The firefight erupted about 8am (0500 GMT) on Sunday after security forces surrounded several wanted men in al-Ras neighbourhood of al-Jawazat, a security source in Riyadh said.
The shootout dragged on into the night.
Saudi security forces are on high
alert with clashes erupting often
Witnesses said gunfire could still be heard on Monday morning. Officials described the insurgents as "terrorists".
Aljazeera learned that at least one Saudi police officer was shot dead on Sunday and another 15 wounded by midday.
Other sources said a total of 35 security personnel had been wounded.
Several security vehicles were damaged.
On Sunday, Saudi Arabia's Al-Ekhbariya television broadcast comments from Prince Faisal bin Bandar bin Abd al-Aziz, amir of al-Qassim region, confirming that three suspected fighters had been shot and killed.
"They were asked to surrender, but those people are known not to listen," Faisal told the television station. He described the armed men as "terrorists" but did not say which organisation they belonged to.
Witnesses said they saw at least three people being carried away from the house on Sunday morning, but it was not clear whether they were wounded or dead.
Speaking to Aljazeera by phone from the scene in al-Qassim, a Saudi witness, Sulayman al-Siwayan, said there was heavy security presence in al-Ras.
"They were asked to surrender, but those people are known
not to listen"
Prince Faisal bin Bandar bin Abd al-Aziz, amir of al-Qassim region
"One or two helicopters can be seen hovering over the area and explosions and sporadic shootouts can be heard from time to time," he said.
Roads leading to the area have been closed and the neighbourhood isolated, al-Siwayan said.
A medical source at a local hospital told Aljazeera that 51 security personnel had arrived for treatment, but al-Siwayan said the number was an exaggeration. He put the number of security casualties at about 15.
When asked about the identity of the armed men, he said: "They are people with no belief or doctrine. They do not belong to any group but to the devil."
The security operation took place next to a girls' primary school which had 94 students and 13 teachers, a factor that complicated the situation, al-Siwayan said.
"Fortunately, all have been safely evacuated," he added.
The incident came less than a month after a suspected al-Qaida member was arrested along with two of his companions after a heavy gun battle on 13 March in the Red Sea city of Jedda.
Violence blamed on al-Qaida since May 2003 has killed 90 civilians, according to official figures. Thirty-nine members of the security forces and 92 fighters have also been killed.