Medical sources said the three men, aged 18, 20 and 22, died shortly after they were admitted to the Abu Yussef al-Najjar hospital on Tuesday, as a result of waste water flood in a tunnel beneath the Gaza-Egypt border.
Witnesses told AFP the men were pulled from one of the many tunnels that run underneath the frontier in the southern city of Rafah.
"Three days ago, waste water leaked from the Egyptian side into a tunnel, where the men were working, smuggling goods," one witness told AFP on condition of anonymity.
"The leak made the tunnel partially collapse, and the men were rescued this morning in critical condition," he added.
There was no immediate information on how the waste water entered the tunnel.
Tuesday's deaths came just days after another three Palestinians died when a butane gas cylinder they were transporting through the tunnels exploded.
The accident left four others injured, medical sources said.
According to the Gaza-based Al-Mezan Centre for Human Rights, around 200 people have been killed in the tunnels since 2006. Another 583 have been injured, the group says.