Inaldo Santana, deputy chief of the special case squad, said a judge was expected to issue an order for the arrest of the three, being held at police headquarters. The three were picked out of a line-up by Wagner dos Santos, 22, who survived the massacre.
Early on Friday, gunmen opened fire on a group of street children sleeping near Candelaria church in the heart of Rio's financial district, killing seven of them. Mr dos Santos was seriously wounded and only on Sunday was he able to leave the hospital briefly, to identify the policemen.
The murder of street children is common in Brazil. Human rights organisations estimate there have been an average of two killings a day this year. Most street children have homes but they run away because of poverty or family problems. The children, who must steal or beg to survive, are regarded as nuisances and become targets of death squads often made up of off-duty or retired police officers. But Friday's killings horrified Brazil.
Earlier on Sunday, two weeping mothers buried their young sons amid cries for justice. 'The only justice is up in heaven. Down here is no man's land. It is the Wild West,' said Jose Gabriel da Silva, the stepfather of Paulo Roberto de Oliveira, 11.
'Nothing will be done. They can not bring him back to life,' said the boy's mother, Anna Maria.
Paulo and Marcelo Candido de Jesus, 14, were the first victims of Friday's killings to be buried. Five other bodies are awaiting identification. An eighth teenager was in hospital in a coma, with little chance for survival.
Under grey skies, about 200 people - mostly journalists, human rights officials and politicians - gathered at the cemetery to bury the two boys. Lying in a small white coffin, Paulo was dressed in a white T-shirt, shorts and socks. A single pink rose was placed in his hands. His mother said he went out one day a month ago to buy bread and never returned.