The detained are Israeli citizens, according to newspaper Haaretz.
The sale of land in the West Bank is prohibited by the Palestinian Authority, so using fake documents is almost the only way for Israelis to purchase the land.
Two of the suspects will be detained until later this week, while the third has been released on house arrest. The names of the suspects have not been disclosed as official charges have not been filed yet, The Jerusalem Post reported.
The investigation and arrests, which took place on Monday, followed several earlier hearings of West Bank land sale cases in the Israeli High Court of Justice, as the transactions were challenged by the landowners.
Yariv Oppenheimer, the leader of Israeli left-wing group Peace Now, which is fighting against the illegal land sales in the West Bank, praised the arrests.
"We hope that settlers now understand that they cannot bring fake documents to the High Court of Justice. This is the first time that we see a real action being taken on the issue of fake documents," Oppenheimer said, The Jerusalem Post reported.
Jewish settlements on the West Bank are a subject of tension between Israel and the Palestinian Authority. The West Bank was occupied by Israel following the 1967 Six-Day War. Since then, Israel has built numerous settlements and recently announced new construction plans, despite condemnation by Palestinians and the international community.
In August 2014, Israel announced it was appropriating 400 hectares of land in the West Bank to build about 1,000 housing units for Jewish families in East Jerusalem.
In November 2014, Israeli Prime Minister Benjamin Netanyahu allocated $18 million to build 300 housing units in the West Bank settlement of Beit El.
