The Tawau police team also seized a rifle, a revolver and a samurai sword from the unidentified suspects after a chase.
Police are contacting the Indonesian and Philippine authorities to identify the suspects, believed to be foreigners, FMT has learned.
Tawau police chief ACP Fadil Marsus said a police team had spotted and trailed a white Kancil car travelling in a suspicious manner with three men inside at Mile 2 of the Kalabakan-Keningau road.
“The small car sped off towards Mile 3 when the men realised they were being tailed.
“The car then veered into an oil palm estate at Block 22 and stopped about 1km from the Kalabakan-Keningau road.”
When the police team approached them, the suspects opened fire and tried to flee on foot.
Fadil said the police team returned fire and killed all three suspects, two of whom were in their 40s.
“We believe the men may be involved in crime or terrorism. They had no identification documents on them.”
Police also seized face masks and gloves from the suspects, he said, adding no one on the police team was injured in the shootout.
The Eastern Sabah Security Command (Esscom) is expected to provide more details on the men tomorrow.
Esscom commander DCP Hazani Ghazali said the authorities were trying to identify the suspects with the help of neighbouring countries.
“We believe the suspects were foreigners, possibly Filipinos,” he said.
Esscom is in charge of security in the Esszone, a special security area that spans 1,700km of coastline that overlooks the Sulu Sea. The coastal area had seen a spate of kidnappings and sea-jackings over the past few years.
Security was at its highest in the Esszone during the five-month battle between government troops and pro-Islamic State groups in Marawi city in the southern Philippines last year over fears that the militants may flee to Sabah.
Thanks to the heavy security, no kidnappings or piracy cases were recorded last year. However, Esscom killed one man with links to the Abu Sayyaf group of southern Philippines last year.