Another person had died on Monday after protests turned violent.
Witnesses and medical sources said that the three deaths were caused by police using live ammunition to disperse the protesters.
The protests are in reaction to a local government decision to allocate land to the Shri Amarnathji Shrine Board, a Hindu trust, so that it can build "temporary structures" for tens of thousands of Hindu pilgrims who make an annual pilgrimage to a mountain shrine.
'Plot to settle Hindus'
Protesters say the structures are an attempt to settle non-local Hindus in the area to reduce Muslims to a minority.
Ghulam Nabi Azad, Kashmir's chief minister, has issued an appeal for calm and said that further accommodation for Hindus would not be built until further notice.
"I request all to maintain peace and brotherhood.
He said an all-party meeting would be held "to reach a consensus on how to deal with the issue".
The cave that Hindus trek to in Kashmir is considered to be the shelter of the god Shiva.
They typically stay in tents, but as the numbers of pilgrims increased to 400,000 last year better facilities were demanded.
This year's pilgrimage, which lasts two months, began on June 17.