Form N-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-Q


QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number         811-10345         

        Nuveen Dividend Advantage Municipal Fund 3         
(Exact name of registrant as specified in charter)


        333 West Wacker Drive, Chicago, Illinois 60606         

(Address of principal executive offices) (Zip code)


Jessica R. Droeger—Vice President and Secretary
        333 West Wacker Drive, Chicago, Illinois 60606         

(Name and address of agent for service)

Registrant's telephone number, including area code:         312-917-7700        

Date of fiscal year end:            10/31          

Date of reporting period:          1/31/06         

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Schedule of Investments

  Portfolio of Investments (Unaudited)
Nuveen Dividend Advantage Municipal Fund 3 (NZF)
January 31, 2006

        Optional         
Principal        Call         
Amount (000)    Description (1)    Provisions (2)    Ratings (3)    Value 

    Alabama – 0.9% (0.6% of Total Investments)             
$      5,655    Alabama State Port Authority, Revenue Bonds, State Docks Department Facilities, Series 2001,    10/11 at 100.00    AAA   $   5,864,687 
     5.250%, 10/01/26 – AMBAC Insured (Alternative Minimum Tax)             

    Alaska – 0.7% (0.4% of Total Investments)             
4,000    Alaska Student Loan Corporation, Student Loan Revenue Bonds, Series 1998A, 5.250%, 7/01/14 –    7/08 at 100.00    AAA    4,105,600 
     AMBAC Insured (Alternative Minimum Tax)             

    Arkansas – 0.9% (0.6% of Total Investments)             
    Sebastian County Health Facilities Board, Arkansas, Hospital Revenue Improvement Bonds, Sparks             
    Regional Medical Center, Series 2001A:             
1,805     5.500%, 11/01/13    11/11 at 101.00    Baa1    1,915,809 
1,900     5.500%, 11/01/14    11/11 at 101.00    Baa1    2,009,744 
1,745     5.250%, 11/01/21    11/11 at 101.00    Baa1    1,791,208 

5,450    Total Arkansas            5,716,761 

    California – 10.0% (6.8% of Total Investments)             
855    California Health Facilities Financing Authority, Health Facility Revenue Bonds, Adventist    3/13 at 100.00    A    865,901 
     Health System/West, Series 2003A, 5.000%, 3/01/28             
5,000    California Infrastructure Economic Development Bank, Revenue Bonds, Kaiser Hospital Assistance    8/11 at 102.00    A+    5,271,200 
     LLC, Series 2001A, 5.550%, 8/01/31             
5,000    California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System,    4/34 at 100.00    A+    4,915,400 
     Series 2004G, 2.300%, 4/01/34 (Mandatory put 5/01/07)             
18,850    California, General Obligation Veterans Welfare Bonds, Series 2001BZ, 5.350%, 12/01/21 – MBIA    6/07 at 101.00    AAA    19,174,409 
     Insured (Alternative Minimum Tax)             
    Los Angeles Regional Airports Improvement Corporation, California, Lease Revenue Refunding             
    Bonds, LAXFUEL Corporation at Los Angeles International Airport, Series 2001:             
13,955     5.750%, 1/01/16 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    15,096,240 
5,000     5.375%, 1/01/21 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    5,215,100 
1,500     5.250%, 1/01/23 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    1,544,070 
10,000     5.500%, 1/01/32 – AMBAC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    10,353,800 

60,160    Total California            62,436,120 

    Colorado – 7.6% (5.1% of Total Investments)             
2,250    Canterberry Crossing Metropolitan District II, Parker, Colorado, Limited Tax General    12/12 at 100.00    N/R    2,367,720 
     Obligation Bonds, Series 2002, 7.375%, 12/01/32             
1,700    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Belle    3/12 at 100.00    N/R    1,766,793 
     Creek Education Center, Series 2002A, 7.625%, 3/15/32             
3,250    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds,    5/12 at 102.00    N/R    3,451,598 
     Montessori Peaks Building Foundation, Series 2002A, 8.000%, 5/01/32             
1,775    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Weld    6/11 at 100.00    Ba1    1,836,575 
     County School District 6 – Frontier Academy, Series 2001, 7.375%, 6/01/31             
3,380    Colorado Housing Finance Authority, Multifamily Project Bonds, Class I, Series 2001A-1,    10/11 at 100.00    AAA    3,479,879 
     5.500%, 4/01/31 (Alternative Minimum Tax)             
10,100    Colorado Springs, Colorado, Utility System Revenue Refunding and Improvement Bonds, Series    11/07 at 100.00    AA    10,379,972 
     1997A, 5.375%, 11/15/26             
    Denver City and County, Colorado, Airport System Revenue Bonds, Series 1996A:             
19,150     5.750%, 11/15/16 – MBIA Insured    11/06 at 101.00    AAA    19,685,817 
1,105     5.500%, 11/15/25 – MBIA Insured    11/06 at 101.00    AAA    1,132,139 
2,000    Denver City and County, Colorado, Airport System Revenue Refunding Bonds, Series 2001A,    11/11 at 100.00    AAA    2,139,140 
     5.500%, 11/15/16 – FGIC Insured (Alternative Minimum Tax)             
1,000    Plaza Metropolitan District 1, Lakewood, Colorado, Tax Increment Revenue Bonds, Series 2003,    6/14 at 101.00    N/R    1,100,060 
     8.000%, 12/01/25             

45,710    Total Colorado            47,339,693 

    Delaware – 0.5% (0.3% of Total Investments)             
2,835    Delaware Housing Authority, Multifamily Mortgage Revenue Bonds, Series 2001A, 5.400%, 7/01/24    7/12 at 100.00    Aa3    2,853,342 

    District of Columbia – 1.0% (0.7% of Total Investments)             
6,000    District of Columbia, Revenue Bonds, Catholic University of America, Series 1999, 5.625%,    10/09 at 101.00    AAA    6,423,000 
     10/01/29 – AMBAC Insured             

    Florida – 1.6% (1.1% of Total Investments)             
2,000    Dade County, Florida, Water and Sewerage System Revenue Bonds, Series 1997, 5.375%, 10/01/16 –    10/07 at 102.00    AAA    2,103,360 
     FGIC Insured             
    Orange County Housing Finance Authority, Florida, Multifamily Housing Revenue Bonds, Oak Glen             
    Apartments, Series 2001G:             
1,105     5.400%, 12/01/32 – FSA Insured    12/11 at 100.00    AAA    1,131,476 
2,195     5.450%, 12/01/41 – FSA Insured    12/11 at 100.00    AAA    2,240,502 
4,175    Pace Property Finance Authority Inc., Florida, Utility System Improvement and Revenue    9/07 at 102.00    AAA    4,370,933 
     Refunding Bonds, Series 1997, 5.250%, 9/01/17 – AMBAC Insured             

9,475    Total Florida            9,846,271 

    Georgia – 2.3% (1.5% of Total Investments)             
5,000    Atlanta, Georgia, Airport General Revenue Bonds, Series 2000B, 5.625%, 1/01/30 – FGIC Insured    1/10 at 101.00    AAA    5,240,450 
     (Alternative Minimum Tax)             
2,700    Atlanta, Georgia, Tax Allocation Bonds, Atlantic Station Project, Series 2001, 7.900%, 12/01/24    12/11 at 101.00    N/R    2,923,749 
3,740    Gainesville and Hall County Hospital Authority, Georgia, Revenue Anticipation Certificates,    5/11 at 100.00    A–    3,852,798 
     Northeast Georgia Health Services Inc., Series 2001, 5.500%, 5/15/31             
2,000    Henry County Water and Sewerage Authority, Georgia, Revenue Bonds, Series 2000, 5.625%,    2/10 at 101.00    AAA    2,179,060 
     2/01/30 (Pre-refunded 2/01/10) – FGIC Insured             

13,440    Total Georgia            14,196,057 

    Hawaii – 0.9% (0.6% of Total Investments)             
5,125    Hawaii, Highway Revenue Bonds, Series 2001, 5.375%, 7/01/21 (Pre-refunded 7/01/11) – FSA    7/11 at 100.00    AAA    5,585,994 
     Insured             

    Illinois – 18.1% (12.2% of Total Investments)             
3,000    Chicago, Illinois, General Obligation Bonds, Neighborhoods Alive 21 Program, Series 2001A,    1/11 at 100.00    AAA    3,262,410 
     5.500%, 1/01/31 (Pre-refunded 1/01/11) – FGIC Insured             
1,290    Chicago, Illinois, General Obligation Refunding Bonds, Series 1996B, 5.125%, 1/01/25 – FGIC    1/08 at 100.00    AAA    1,317,155 
     Insured             
8,375    Chicago, Illinois, Revenue Bonds, Midway Airport, Series 2001A, 5.500%, 1/01/19 – FSA Insured    1/11 at 101.00    AAA    8,918,621 
     (Alternative Minimum Tax)             
1,750    Chicago, Illinois, Sales Tax Revenue Bonds, Series 1998, 5.250%, 1/01/28 – FGIC Insured    7/08 at 102.00    AAA    1,839,128 
10,800    Chicago, Illinois, Sales Tax Revenue Bonds, Series 1999, 5.375%, 1/01/30 (Pre-refunded    1/09 at 101.00    AAA    11,483,532 
     1/01/09) – FGIC Insured             
4,950    Chicago, Illinois, Second Lien Passenger Facility Charge Revenue Bonds, O’Hare International    1/11 at 101.00    AAA    5,111,370 
     Airport, Series 2001A, 5.375%, 1/01/32 – AMBAC Insured (Alternative Minimum Tax)             
2,220    Chicago, Illinois, Second Lien Wastewater Transmission Revenue Bonds, Series 2001A, 5.500%,    No Opt. Call    AAA    2,491,284 
     1/01/16 – MBIA Insured             
8,610    Chicago, Illinois, Second Lien Wastewater Transmission Revenue Bonds, Series 2001A, 5.500%,    1/11 at 100.00    AAA    9,363,117 
     1/01/26 (Pre-refunded 1/01/11) – AMBAC Insured             
10,000    Chicago, Illinois, Senior Lien Water Revenue Bonds, Series 2001, 5.000%, 11/01/26    11/11 at 100.00    AAA    10,735,800 
     (Pre-refunded 11/01/11) – AMBAC Insured             
1,665    Chicago, Illinois, Third Lien General Airport Revenue Bonds, O’Hare International Airport,    1/16 at 100.00    AAA    1,722,193 
     Series 2005A, 5.000%, 1/01/33 – FGIC Insured             
2,415    Illinois Finance Authority, General Obligation Debt Certificates, Local Government Program –    12/14 at 100.00    Aaa    2,531,669 
     Kankakee County, Series 2005B, 5.000%, 12/01/24 – AMBAC Insured             
1,100    Illinois Health Facilities Authority, Revenue Bonds, Condell Medical Center, Series 2000,    5/10 at 101.00    Baa2    1,177,275 
     6.500%, 5/15/30             
9,000    Illinois Health Facilities Authority, Revenue Bonds, Covenant Retirement Communities Inc.,    12/11 at 101.00    BBB    9,363,690 
     Series 2001, 5.875%, 12/01/31             
15,000    Illinois Health Facilities Authority, Revenue Bonds, Loyola University Health System, Series    7/11 at 100.00    Baa1    15,835,050 
     2001A, 6.125%, 7/01/31             
7,000    Lombard Public Facilities Corporation, Illinois, First Tier Conference Center and Hotel    1/16 at 100.00    N/R    7,352,100 
     Revenue Bonds, Series 2005A-1, 7.125%, 1/01/36             
16,900    Metropolitan Pier and Exposition Authority, Illinois, Revenue Bonds, McCormick Place Expansion    12/09 at 101.00    AAA    17,863,638 
     Project, Series 1999A, 5.250%, 12/15/28 – FGIC Insured             
2,000    Metropolitan Pier and Exposition Authority, Illinois, Revenue Refunding Bonds, McCormick Place    No Opt. Call    AAA    2,333,620 
     Expansion Project, Series 1998A, 5.500%, 6/15/29 – FGIC Insured             

106,075    Total Illinois            112,701,652 

    Indiana – 5.9% (4.0% of Total Investments)             
1,000    Clark-Pleasant Community School Building Corporation, Indiana, First Mortgage Bonds, Series    1/12 at 100.00    AAA    1,074,710 
     2001, 5.000%, 1/15/26 (Pre-refunded 1/15/12) – AMBAC Insured             
1,255    Clark-Pleasant Community School Building Corporation, Indiana, First Mortgage Bonds, Series    1/12 at 100.00    AAA    1,348,761 
     2001, 5.000%, 7/15/21 (Pre-refunded 1/15/12) – AMBAC Insured             
2,750    Evansville Vanderburgh Public Library Lease Corporation, Indiana, First Mortgage Bonds, Series    1/12 at 100.00    AAA    2,973,713 
     2001, 5.125%, 1/15/24 (Pre-refunded 1/15/12) – MBIA Insured             
2,000    Evansville Vanderburgh Public Library Lease Corporation, Indiana, First Mortgage Bonds, Series    1/12 at 100.00    AAA    2,229,180 
     2001, 5.750%, 7/15/18 (Pre-refunded 1/15/12) – MBIA Insured             
3,425    Gary, Indiana, GNMA/FHA Mortgage Revenue Bonds, Windsor Square Project, Series 2001A, 5.375%,    11/11 at 102.00    AAA    3,486,171 
     10/20/41 (Alternative Minimum Tax)             
1,250    Hamilton Southeastern Cumberland Campus School Building Corporation, Indiana, First Mortgage    1/12 at 100.00    AAA    1,325,813 
     Bonds, Series 2001, 5.125%, 1/15/23 – AMBAC Insured             
9,500    Indiana Educational Facilities Authority, Revenue Bonds, Butler University, Series 2001,    2/11 at 100.00    AAA    10,152,460 
     5.500%, 2/01/26 – MBIA Insured             
4,230    Indiana Finance Authority, Educational Facilities Revenue Bonds, Tudor Park Foundation, Series    6/15 at 100.00    Aa3    4,389,471 
     2005B, 5.000%, 6/01/24             
2,800    Indiana Health Facility Financing Authority, Revenue Bonds, Community Hospitals of Indiana,    5/15 at 100.00    AAA    2,889,796 
     Series 2005A, 5.000%, 5/01/35 – AMBAC Insured             
2,650    Indianapolis, Indiana, Special Facility Revenue Bonds, United Airlines Inc., Indianapolis    5/06 at 102.00    N/R    473,888 
     Maintenance Center Project, Series 1995A, 6.500%, 11/15/31 (Alternative Minimum Tax) (5)             
3,500    University of Southern Indiana, Student Fee Bonds, Series 2001H, 5.000%, 10/01/21 – AMBAC    10/11 at 100.00    Aaa    3,690,575 
     Insured             
    Wayne County Jail Holding Corporation, Indiana, First Mortgage Bonds, Series 2001:             
1,150     5.625%, 7/15/18 – AMBAC Insured    1/13 at 101.00    AAA    1,280,456 
1,090     5.500%, 7/15/22 – AMBAC Insured    1/13 at 101.00    AAA    1,204,221 

36,600    Total Indiana            36,519,215 

    Iowa – 5.9% (4.0% of Total Investments)             
2,000    Iowa Finance Authority, Healthcare Revenue Bonds, Great River Medical Center, Series 2001,    5/11 at 100.00    AAA    2,067,860 
     5.250%, 5/15/31 – FSA Insured             
    Iowa Tobacco Settlement Authority, Tobacco Settlement Asset-Backed Revenue Bonds, Series 2001B:             
28,000     5.300%, 6/01/25 (Pre-refunded 6/01/11)    6/11 at 101.00    AAA    30,136,680 
3,950     5.600%, 6/01/35 (Pre-refunded 6/01/11)    6/11 at 101.00    AAA    4,346,146 

33,950    Total Iowa            36,550,686 

    Kentucky – 3.1% (2.1% of Total Investments)             
18,500    Louisville and Jefferson County Metropolitan Sewer District, Kentucky, Sewer and Drainage    11/11 at 101.00    AAA    19,408,535 
     System Revenue Bonds, Series 2001A, 5.125%, 5/15/27 – MBIA Insured             

    Louisiana – 3.4% (2.3% of Total Investments)             
19,890    Tobacco Settlement Financing Corporation, Louisiana, Tobacco Settlement Asset-Backed Bonds,    5/11 at 101.00    BBB    20,833,979 
     Series 2001B, 5.875%, 5/15/39             

    Maine – 1.1% (0.7% of Total Investments)             
    Maine State Housing Authority, Single Family Mortgage Purchase Bonds, Series 2001B:             
4,610     5.400%, 11/15/21 (Alternative Minimum Tax)    11/10 at 100.00    AA+    4,759,963 
1,905     5.500%, 11/15/32 (Alternative Minimum Tax)    11/10 at 100.00    AA+    1,951,882 

6,515    Total Maine            6,711,845 

    Maryland – 2.0% (1.3% of Total Investments)             
1,570    Maryland Community Development Administration, Insured Multifamily Housing Mortgage Loan    7/11 at 100.00    Aa2    1,617,241 
     Revenue Bonds, Series 2001B, 5.250%, 7/01/21 (Alternative Minimum Tax)             
10,600    Maryland Energy Financing Administration, Revenue Bonds, AES Warrior Run Project, Series 1995,    9/07 at 100.00    N/R    10,747,976 
     7.400%, 9/01/19 (Alternative Minimum Tax)             

12,170    Total Maryland            12,365,217 

    Massachusetts – 1.7% (1.1% of Total Investments)             
5,000    Massachusetts Port Authority, Special Facilities Revenue Bonds, Delta Air Lines Inc., Series    1/11 at 101.00    AAA    5,234,550 
     2001A, 5.500%, 1/01/18 – AMBAC Insured (Alternative Minimum Tax)             
5,150    Massachusetts Turnpike Authority, Metropolitan Highway System Revenue Bonds, Senior Series    1/07 at 102.00    AAA    5,228,589 
     1997A, 5.000%, 1/01/37 – MBIA Insured             

10,150    Total Massachusetts            10,463,139 

    Michigan – 9.1% (6.1% of Total Investments)             
15,000    Detroit City School District, Wayne County, Michigan, Unlimited Tax School Building and Site    No Opt. Call    AAA    18,533,250 
     Improvement Bonds, Series 2001A, 6.000%, 5/01/29 – FSA Insured             
11,000    Kent Hospital Finance Authority, Michigan, Revenue Bonds, Spectrum Health, Series 2001A,    7/11 at 101.00    AA (4)    12,089,660 
     5.500%, 1/15/31 (Pre-refunded 7/15/11)             
1,235    Michigan State Building Authority, Revenue Bonds, Facilities Program, Series 2001I, 5.500%,    10/11 at 100.00    AA–    1,345,347 
     10/15/18             
1,355    Michigan State Hospital Finance Authority, Hospital Revenue Bonds, Detroit Medical Center    8/08 at 101.00    BB–    1,303,009 
     Obligated Group, Series 1998A, 5.250%, 8/15/23             
3,485    Michigan State Hospital Finance Authority, Hospital Revenue Refunding Bonds, Sisters of Mercy    No Opt. Call    AAA    3,763,486 
     Health Corporation, Series 1993P, 5.375%, 8/15/14 (ETM) – MBIA Insured             
    Michigan State Hospital Finance Authority, Hospital Revenue Refunding Bonds, Sparrow Obligated             
    Group, Series 2001:             
1,400     5.500%, 11/15/21    11/11 at 101.00    A+    1,475,572 
2,500     5.625%, 11/15/31    11/11 at 101.00    A+    2,620,300 
12,640    Royal Oak Hospital Finance Authority, Michigan, Hospital Revenue Bonds, William Beaumont    11/11 at 100.00    AAA    13,124,112 
     Hospital, Series 2001M, 5.250%, 11/15/31 – MBIA Insured             
2,395    Ypsilanti Community Utilities Authority, Washtenaw County, Michigan, General Obligation Bonds,    5/11 at 100.00    AAA    2,528,593 
     Sanitary Sewerage System 3, Series 2001, 5.100%, 5/01/31 – FGIC Insured             

51,010    Total Michigan            56,783,329 

    Minnesota – 0.4% (0.3% of Total Investments)             
2,350    Dakota County Community Development Agency, Minnesota, GNMA Collateralized Multifamily Housing    10/11 at 105.00    Aaa    2,481,247 
     Revenue Bonds, Rose Apartments Project, Series 2001, 6.350%, 10/20/37 (Alternative Minimum Tax)             

    Mississippi – 0.4% (0.3% of Total Investments)             
2,155    Mississippi Business Finance Corporation, GNMA Collateralized Retirement Facility Mortgage    5/09 at 103.00    AAA    2,219,499 
     Revenue Refunding Bonds, Aldersgate Retirement Community Inc. Project, Series 1999A, 5.450%,             
     5/20/34             

    Missouri – 2.5% (1.7% of Total Investments)             
2,000    Fenton, Missouri, Tax Increment Refunding and Improvement Revenue Bonds, Gravois Bluffs    10/12 at 100.00    N/R    2,048,080 
     Redevelopment Project, Series 2002, 6.125%, 10/01/21             
    Missouri Development Finance Board, Cultural Facilities Revenue Bonds, Nelson Gallery             
    Foundation, Series 2001A:             
3,335     5.250%, 12/01/19 – MBIA Insured    12/11 at 100.00    AAA    3,592,028 
3,510     5.250%, 12/01/20 – MBIA Insured    12/11 at 100.00    AAA    3,780,516 
3,695     5.250%, 12/01/21 – MBIA Insured    12/11 at 100.00    AAA    3,959,377 
2,040     5.250%, 12/01/22 – MBIA Insured    12/11 at 100.00    AAA    2,181,576 

14,580    Total Missouri            15,561,577 

    Montana – 0.8% (0.6% of Total Investments)             
5,000    Montana Board of Investments, Exempt Facility Revenue Bonds, Stillwater Mining Company, Series    7/10 at 101.00    B1    5,189,000 
     2000, 8.000%, 7/01/20 (Alternative Minimum Tax)             

    Nebraska – 1.0% (0.7% of Total Investments)             
    Nebraska Investment Finance Authority, Single Family Housing Revenue Bonds, Series 2001D:             
2,570     5.250%, 9/01/21 (Alternative Minimum Tax)    9/11 at 100.00    AAA    2,643,039 
3,460     5.375%, 9/01/32 (Alternative Minimum Tax)    9/11 at 100.00    AAA    3,529,131 

6,030    Total Nebraska            6,172,170 

    Nevada – 7.8% (5.2% of Total Investments)             
35,000    Clark County, Nevada, Limited Tax General Obligation Bank Bonds, Series 2000, 5.500%, 7/01/30    7/10 at 100.00    AAA    37,301,946 
     – MBIA Insured             
2,000    Director of Nevada State Department of Business and Industry, Revenue Bonds, Las Vegas    1/10 at 100.00    AAA    2,089,640 
     Monorail Project, First Tier, Series 2000, 5.375%, 1/01/40 – AMBAC Insured             
4,000    Director of Nevada State Department of Business and Industry, Revenue Bonds, Las Vegas    1/10 at 102.00    N/R    4,186,680 
     Monorail Project, Second Tier, Series 2000, 7.375%, 1/01/40             
350    Nevada Housing Division, Single Family Mortgage Bonds, Senior Series 1998A-1, 5.300%, 4/01/18    4/08 at 101.50    Aaa    359,811 
     (Alternative Minimum Tax)             
4,290    University of Nevada, Revenue Bonds, Community College System, Series 2001A, 5.250%, 7/01/26 –    1/12 at 100.00    AAA    4,560,613 
     FGIC Insured             

45,640    Total Nevada            48,498,690 

    New Hampshire – 0.3% (0.3% of Total Investments)             
2,000    New Hampshire Health and Education Authority, Hospital Revenue Bonds, Concord Hospital, Series    10/11 at 101.00    Aaa    2,171,920 
     2001, 5.500%, 10/01/21 – FSA Insured             

    New Jersey – 2.4% (1.6% of Total Investments)             
10,000    New Jersey Economic Development Authority, Water Facilities Revenue Bonds, American Water    11/12 at 101.00    Aaa    10,423,600 
     Company, Series 2002A, 5.250%, 11/01/32 – AMBAC Insured (Alternative Minimum Tax)             
4,125    New Jersey Transit Corporation, Certificates of Participation, Federal Transit Administration    No Opt. Call    AAA    4,553,794 
     Grants, Series 2002A, 5.500%, 9/15/13 – AMBAC Insured             

14,125    Total New Jersey            14,977,394 

    New York – 5.3% (3.5% of Total Investments)             
1,780    East Rochester Housing Authority, New York, GNMA Secured Revenue Bonds, Gates Senior Housing    10/11 at 101.00    AAA    1,840,556 
     Inc., Series 2001, 5.300%, 4/20/31             
5,350    Metropolitan Transportation Authority, New York, Dedicated Tax Fund Bonds, Series 2001A,    11/11 at 100.00    AAA    5,768,424 
     5.000%, 11/15/31 (Pre-refunded 11/15/11) – FGIC Insured             
4,155    Monroe County Airport Authority, New York, Revenue Refunding Bonds, Greater Rochester    No Opt. Call    AAA    4,547,066 
     International Airport, Series 1999, 5.750%, 1/01/13 – MBIA Insured (Alternative Minimum Tax)             
    New York City Municipal Water Finance Authority, New York, Water and Sewerage System Revenue             
    Bonds, Fiscal Series 2001A:             
5,710     5.500%, 6/15/33 (Pre-refunded 6/15/10) – FGIC Insured    6/10 at 101.00    AAA    6,242,172 
8,610     5.500%, 6/15/33 (Pre-refunded 6/15/10) – MBIA Insured    6/10 at 101.00    AAA    9,412,452 
2,500    New York City, New York, General Obligation Bonds, Fiscal Series 2002G, 5.625%, 8/01/20 – MBIA    8/12 at 100.00    AAA    2,764,400 
     Insured             
2,000    New York State Tobacco Settlement Financing Corporation, Tobacco Settlement Asset-Backed and    6/11 at 100.00    AA–    2,166,140 
     State Contingency Contract-Backed Bonds, Series 2003B-1C, 5.500%, 6/01/16             

30,105    Total New York            32,741,210 

    North Carolina – 1.1% (0.7% of Total Investments)             
    Charlotte-Mecklenburg Hospital Authority, North Carolina, Healthcare System Revenue Bonds, DBA             
    Carolinas Healthcare System, Series 2005A:             
1,750     4.875%, 1/15/32    1/15 at 100.00    AA    1,752,975 
3,000     5.000%, 1/15/45    1/15 at 100.00    AA    3,019,290 
1,800    North Carolina Municipal Power Agency 1, Catawba Electric Revenue Bonds, Series 2003A, 5.500%,    No Opt. Call    A3    1,950,930 
     1/01/13             

6,550    Total North Carolina            6,723,195 

    Ohio – 2.4% (1.6% of Total Investments)             
3,350    Ohio Housing Finance Agency, GNMA Mortgage-Backed Securities Program Residential Mortgage    3/08 at 101.50    AAA    3,438,876 
     Revenue Bonds, Series 1998A-1, 5.300%, 9/01/19 – FSA Insured (Alternative Minimum Tax)             
7,600    Ohio Water Development Authority, Solid Waste Disposal Revenue Bonds, Bay Shore Power, Series    9/09 at 102.00    N/R    7,878,388 
     1998B, 6.625%, 9/01/20 (Alternative Minimum Tax)             
    Portage County, Ohio, General Obligation Bonds, Series 2001:             
1,870     5.000%, 12/01/21 – FGIC Insured    12/11 at 100.00    AAA    1,977,001 
1,775     5.000%, 12/01/23 – FGIC Insured    12/11 at 100.00    AAA    1,871,454 

14,595    Total Ohio            15,165,719 

    Oklahoma – 0.4% (0.3% of Total Investments)             
2,500    Oklahoma Development Finance Authority, Revenue Refunding Bonds, Hillcrest Healthcare System,    8/09 at 101.00    AAA    2,694,425 
     Series 1999A, 5.625%, 8/15/29 (Pre-refunded 8/15/09)             

    Oregon – 2.5% (1.7% of Total Investments)             
4,700    Oregon Health, Housing, Educational and Cultural Facilities Authority, Revenue Bonds,    11/11 at 101.00    AAA    4,992,904 
     PeaceHealth Project, Series 2001, 5.250%, 11/15/21 – AMBAC Insured             
10,000    Oregon Housing and Community Services Department, Multifamily Housing Revenue Bonds, Series    7/10 at 100.00    Aaa    10,309,200 
     2000A, 6.050%, 7/01/42 (Alternative Minimum Tax)             

14,700    Total Oregon            15,302,104 

    Pennsylvania – 1.9% (1.3% of Total Investments)             
    Allegheny County Hospital Development Authority, Pennsylvania, Revenue Bonds, West Penn             
    Allegheny Health System, Series 2000B:             
2,000     9.250%, 11/15/22    11/10 at 102.00    Ba3    2,381,600 
2,000     9.250%, 11/15/30    11/10 at 102.00    Ba3    2,373,220 
3,500    Pennsylvania Economic Development Financing Authority, Senior Lien Resource Recovery Revenue    7/06 at 100.00    BB    3,534,405 
     Bonds, Northampton Generating Project, Series 1994A, 6.600%, 1/01/19 (Alternative Minimum Tax)             
3,205    Philadelphia School District, Pennsylvania, General Obligation Bonds, Series 2002B, 5.625%,    8/12 at 100.00    AAA    3,586,427 
     8/01/16 (Pre-refunded 8/01/12) – FGIC Insured             

10,705    Total Pennsylvania            11,875,652 

    South Carolina – 1.6% (1.1% of Total Investments)             
2,185    Greenville County, South Carolina, Special Source Revenue Bonds, Road Improvement Project,    4/11 at 101.00    AAA    2,371,337 
     Series 2001, 5.500%, 4/01/21 – AMBAC Insured             
6,850    South Carolina Transportation Infrastructure Bank, Revenue Bonds, Series 2001A, 5.500%,    10/11 at 100.00    Aaa    7,528,013 
     10/01/22 (Pre-refunded 10/01/11) – AMBAC Insured             

9,035    Total South Carolina            9,899,350 

    Tennessee – 1.3% (0.9% of Total Investments)             
5,210    Memphis-Shelby County Airport Authority, Tennessee, Airport Revenue Bonds, Series 2001A,    3/11 at 100.00    AAA    5,557,194 
     5.500%, 3/01/14 – FSA Insured (Alternative Minimum Tax)             
1,185    Tennessee Housing Development Agency, Homeownership Program Bonds, Series 1998-2, 5.350%,    1/09 at 101.00    AA    1,214,815 
     7/01/23 (Alternative Minimum Tax)             
1,290    Tennessee Housing Development Agency, Homeownership Program Bonds, Series 2001-3A, 5.200%,    7/11 at 100.00    AA    1,325,256 
     7/01/22 (Alternative Minimum Tax)             

7,685    Total Tennessee            8,097,265 

    Texas – 17.9% (12.0% of Total Investments)             
1,125    Brushy Creek Municipal Utility District, Williamson County, Texas, Combination Unlimited Tax    6/09 at 100.00    Aaa    1,167,907 
     and Revenue Refunding Bonds, Series 2001, 5.125%, 6/01/26 – FSA Insured             
    Collins and Denton Counties, Frisco, Texas, General Obligation Bonds, Series 2001:             
1,910     5.000%, 2/15/20 – FGIC Insured    2/11 at 100.00    AAA    2,004,717 
2,005     5.000%, 2/15/21 – FGIC Insured    2/11 at 100.00    AAA    2,106,573 
3,850    Dallas-Ft. Worth International Airport, Texas, Joint Revenue Refunding and Improvement Bonds,    11/11 at 100.00    AAA    4,025,983 
     Series 2001A, 5.500%, 11/01/35 – FGIC Insured (Alternative Minimum Tax)             
5,000    Decatur Hospital Authority, Texas, Revenue Bonds, Wise Regional Health System, Series 2004A,    9/14 at 100.00    N/R    5,411,400 
     7.000%, 9/01/25             
4,040    Harris County, Texas, Tax and Revenue Certificates of Obligation, Series 2001, 5.000%, 8/15/27    8/11 at 100.00    AA+    4,154,938 
6,000    Houston, Texas, Junior Lien Water and Sewerage System Revenue Refunding Bonds, Series 2001B,    No Opt. Call    AAA    7,021,980 
     5.500%, 12/01/29 (ETM) – MBIA Insured             
7,000    Houston, Texas, Subordinate Lien Airport System Revenue Bonds, Series 1998B, 5.250%, 7/01/14 –    7/08 at 101.00    AAA    7,301,700 
     FGIC Insured (Alternative Minimum Tax)             
    Houston, Texas, Subordinate Lien Airport System Revenue Refunding Bonds, Series 2001A:             
2,525     5.500%, 7/01/13 – FGIC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    2,697,331 
2,905     5.500%, 7/01/14 – FGIC Insured (Alternative Minimum Tax)    1/12 at 100.00    AAA    3,117,443 
    Jefferson County Health Facilities Development Corporation, Texas, FHA-Insured Mortgage             
    Revenue Bonds, Baptist Hospital of Southeast Texas, Series 2001:             
8,500     5.400%, 8/15/31 – AMBAC Insured    8/11 at 100.00    AAA    8,907,660 
8,500     5.500%, 8/15/41 – AMBAC Insured    8/11 at 100.00    AAA    8,957,980 
10,700    Laredo Independent School District, Webb County, Texas, General Obligation Refunding Bonds,    8/11 at 100.00    AAA    11,184,924 
     Series 2001, 5.000%, 8/01/25             
2,500    Matagorda County Navigation District 1, Texas, Collateralized Revenue Refunding Bonds, Houston    No Opt. Call    AAA    2,656,000 
     Light and Power Company, Series 1997, 5.125%, 11/01/28 – AMBAC Insured (Alternative Minimum             
     Tax)             
1,540    Medina Valley Independent School District, Medina County, Texas, General Obligation Bonds,    2/11 at 100.00    Aaa    1,605,974 
     Series 2001, 5.250%, 2/15/26             
5,430    Mineral Wells Independent School District, Pale Pinto and Parker Counties, Texas, Unlimited    2/08 at 100.00    Aaa    5,481,313 
     School Tax Building and Refunding Bonds, Series 1998, 4.750%, 2/15/22             
3,000    North Central Texas Health Facilities Development Corporation, Revenue Bonds, Texas Health    2/08 at 102.00    AAA    3,142,530 
     Resources System, Series 1997B, 5.375%, 2/15/26 – MBIA Insured             
3,045    Port of Houston Authority, Harris County, Texas, General Obligation Port Improvement Bonds,    10/11 at 100.00    AAA    3,246,549 
     Series 2001B, 5.500%, 10/01/17 – FGIC Insured (Alternative Minimum Tax)             
10,715    Texas Department of Housing and Community Affairs, Residential Mortgage Revenue Bonds, Series    7/11 at 100.00    AAA    11,145,422 
     2001A, 5.350%, 7/01/33 (Alternative Minimum Tax)             
15,700    Texas Water Development Board, Senior Lien State Revolving Fund Revenue Bonds, Series 1996B,    1/07 at 100.00    AAA    15,932,046 
     5.125%, 7/15/18             

105,990    Total Texas            111,270,370 

    Utah – 0.9% (0.6% of Total Investments)             
    Utah Housing Corporation, Single Family Mortgage Bonds, Series 2001E:             
1,935     5.200%, 1/01/18 (Alternative Minimum Tax)    7/11 at 100.00    AA–    1,952,802 
605     5.500%, 1/01/23 (Alternative Minimum Tax)    7/11 at 100.00    Aa2    621,916 
    Utah Housing Corporation, Single Family Mortgage Bonds, Series 2001F-1:             
2,435     4.950%, 7/01/18 (Alternative Minimum Tax)    7/11 at 100.00    Aa2    2,441,331 
620     5.300%, 7/01/23 (Alternative Minimum Tax)    7/11 at 100.00    AA–    622,021 

5,595    Total Utah            5,638,070 

    Virginia – 0.8% (0.5% of Total Investments)             
7,000    Pocahontas Parkway Association, Virginia, Senior Lien Revenue Bonds, Route 895 Connector Toll    8/08 at 77.58    BB–    4,707,290 
     Road, Series 1998B, 0.000%, 8/15/13             

    Washington – 15.8% (10.6% of Total Investments)             
    Bellingham Housing Authority, Washington, Housing Revenue Bonds, Varsity Village Project,             
    Series 2001A:             
1,000     5.500%, 12/01/27 – MBIA Insured    12/11 at 100.00    Aaa    1,073,640 
2,000     5.600%, 12/01/36 – MBIA Insured    12/11 at 100.00    Aaa    2,161,880 
1,500    Grays Harbor County Public Utility District 1, Washington, Electric System Revenue Bonds,    1/11 at 100.00    AAA    1,584,195 
     Series 2001, 5.125%, 1/01/22 – AMBAC Insured             
2,475    Klickitat County Public Utility District 1, Washington, Electric Revenue Bonds, Series 2001B,    12/11 at 100.00    AAA    2,552,443 
     5.000%, 12/01/26 – AMBAC Insured             
12,955    Port of Seattle, Washington, Passenger Facility Charge Revenue Bonds, Series 1998B, 5.300%,    12/08 at 101.00    AAA    13,518,802 
     12/01/16 – AMBAC Insured (Alternative Minimum Tax)             
    Port of Seattle, Washington, Revenue Bonds, Series 2001B:             
2,535     5.625%, 4/01/18 – FGIC Insured (Alternative Minimum Tax)    10/11 at 100.00    AAA    2,721,272 
16,000     5.100%, 4/01/24 – FGIC Insured (Alternative Minimum Tax)    10/08 at 100.00    AAA    16,184,800 
2,090    Public Utility District 1, Benton County, Washington, Electric Revenue Refunding Bonds, Series    11/11 at 100.00    AAA    2,297,328 
     2001A, 5.625%, 11/01/15 – FSA Insured             
5,680    Seattle, Washington, Municipal Light and Power Revenue Refunding and Improvement Bonds, Series    3/11 at 100.00    AAA    6,120,995 
     2001, 5.500%, 3/01/18 – FSA Insured             
4,530    Tacoma, Washington, Solid Waste Utility Revenue Refunding Bonds, Series 2001, 5.250%, 12/01/21    12/11 at 100.00    AAA    4,827,349 
     – AMBAC Insured             
3,720    Washington State Healthcare Facilities Authority, Revenue Bonds, Children’s Hospital and    10/11 at 100.00    Aaa    3,981,702 
     Regional Medical Center, Series 2001, 5.375%, 10/01/18 – AMBAC Insured             
    Washington State Healthcare Facilities Authority, Revenue Bonds, Good Samaritan Hospital,             
    Series 2001:             
5,480     5.500%, 10/01/21 – RAAI Insured    10/11 at 101.00    AA    5,843,488 
25,435     5.625%, 10/01/31 – RAAI Insured    10/11 at 101.00    AA    26,840,792 
    Washington State Healthcare Facilities Authority, Revenue Bonds, Group Health Cooperative of             
    Puget Sound, Series 2001:             
3,005     5.375%, 12/01/17 – AMBAC Insured    12/11 at 101.00    AAA    3,220,669 
2,915     5.375%, 12/01/18 – AMBAC Insured    12/11 at 101.00    AAA    3,119,516 
2,250    Washington, Certificates of Participation, Washington Convention and Trade Center, Series    7/09 at 100.00    AAA    2,367,180 
     1999, 5.250%, 7/01/14 – MBIA Insured             

93,570    Total Washington            98,416,051 

    Wisconsin – 4.5% (3.0% of Total Investments)             
    Appleton, Wisconsin, Waterworks Revenue Refunding Bonds, Series 2001:             
3,705     5.375%, 1/01/20 – FGIC Insured    1/12 at 100.00    Aaa    4,002,326 
1,850     5.000%, 1/01/21 – FGIC Insured    1/12 at 100.00    Aaa    1,951,547 
1,735    Evansville Community School District, Dane, Green and Rock Counties, Wisconsin, General    4/11 at 100.00    AAA    1,895,470 
     Obligation Refunding Bonds, Series 2001, 5.500%, 4/01/20 (Pre-refunded 4/01/11) – FGIC Insured             
12,250    La Crosse, Wisconsin, Pollution Control Revenue Refunding Bonds, Dairyland Power Cooperative,    12/08 at 102.00    AAA    13,034,368 
     Series 1997B, 5.550%, 2/01/15 – AMBAC Insured             
4,000    Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Froedtert and Community    10/11 at 101.00    AA–    4,153,880 
     Health Obligated Group, Series 2001, 5.375%, 10/01/30             
2,500    Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Marshfield Clinic,    2/12 at 100.00    BBB+    2,648,225 
     Series 2001B, 6.000%, 2/15/25             

26,040    Total Wisconsin            27,685,816 

$      878,660    Total Investments (cost $878,773,881) – 148.7%            924,193,136 


    Other Assets Less Liabilities – 1.5%            9,454,027 

    Preferred Shares, at Liquidation Value – (50.2)%            (312,000,000) 

    Net Assets Applicable to Common Shares – 100%           $ 621,647,163 



(1)    All percentages shown in the Portfolio of Investments are based on net assets applicable to 
    Common shares unless otherwise noted. 
(2)    Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. 
    There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities 
    may be subject to periodic principal paydowns. 
(3)    Ratings: Using the higher of Standard & Poor’s or Moody’s rating. Ratings below Baa by Moody’s Investor 
    Service, Inc. or BBB by Standard & Poor’s Group are considered to be below investment grade. 
(4)    Securities are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government 
    agency securities which ensures the timely payment of principal and interest. Such securities are 
    normally considered to be equivalent to AAA rated securities. 
(5)    On December 9, 2002, UAL Corporation, the holding company of United Air Lines, Inc., filed for federal 
    bankruptcy protection. The Adviser determined that it was likely United would not remain current on their 
    interest payment obligations with respect to these bonds and thus has stopped accruing interest. 
N/R    Investment is not rated. 
(ETM)    Security is escrowed to maturity. 

Income Tax Information

The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing taxable market discount and timing differences in recognizing certain gains and losses on investment transactions. At January 31, 2006, the cost of investments was $878,559,731.

Gross unrealized appreciation and gross unrealized depreciation of investments at January 31, 2006, were as follows:


Gross unrealized:   
  Appreciation  $47,237,435 
  Depreciation  (1,604,030) 

Net unrealized appreciation (depreciation) of investments  $45,633,405 



Item 2. Controls and Procedures.

  1. The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)).
  2. There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 3. Exhibits.

File as exhibits as part of this Form a separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)), exactly as set forth below: EX-99 CERT Attached hereto.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)         Nuveen Dividend Advantage Municipal Fund 3        

By (Signature and Title)*          /s/ Jessica R. Droeger                     
                                                    Jessica R. Droeger
                                                    Vice President and Secretary

Date         March 31, 2006        

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*         /s/ Gifford R. Zimmerman                    
                                                   Gifford R. Zimmerman
                                                   Chief Administrative Officer (principal executive officer) 

Date         March 31, 2006        

By (Signature and Title)*         /s/ Stephen D. Foy                              
                                                   Stephen D. Foy
                                                   Vice President and Controller (principal financial officer) 

Date        March 31, 2006        

* Print the name and title of each signing officer under his or her signature.