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:          07/31/05         

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)               
      July 31, 2005               
 
 
 
 
  Principal        Optional Call          Market 
  Amount (000)    Description(1)     Provisions*    Ratings**      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    $   5,906,082 
      5.250%, 10/01/26 (Alternative Minimum Tax) - AMBAC Insured               
 
      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      4,143,160 
      (Alternative Minimum Tax) - AMBAC Insured               
 
      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      1,925,448 
  1,900    5.500%, 11/01/14    11/11 at 101.00    Baa1      2,020,232 
  1,745    5.250%, 11/01/21    11/11 at 101.00    Baa1      1,792,185 
 
      California - 10.2% (6.9% of Total Investments)               
 
  5,000    California Infrastructure Economic Development Bank, Revenue Bonds, Kaiser Hospital Assistance LLC,    8/11 at 102.00    A+      5,326,150 
      Series 2001A, 5.550%, 8/01/31               
 
  18,850    California, General Obligation Veterans Welfare Bonds, Series 2001BZ, 5.350%, 12/01/21    6/07 at 101.00    AAA      19,255,652 
      (Alternative Minimum Tax) - MBIA Insured               
 
  1,500    California Statewide Community Development Authority, Senior Lien Revenue Bonds, East Valley    10/15 at 103.00    N/R      1,655,685 
      Tourist Authority, Series 2003B, 9.250%, 10/01/20 (a)               
 
  5,000    California Statewide Community Development Authority, Revenue Bonds, Kaiser Permanente System,    No Opt. Call    A+      4,919,200 
      Series 2004G, 2.300%, 4/01/34 (Mandatory put 5/01/07)               
 
      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 (Alternative Minimum Tax) - AMBAC Insured    1/12 at 100.00    AAA      15,338,080 
  5,000    5.375%, 1/01/21 (Alternative Minimum Tax) - AMBAC Insured    1/12 at 100.00    AAA      5,248,000 
  1,500    5.250%, 1/01/23 (Alternative Minimum Tax) - AMBAC Insured    1/12 at 100.00    AAA      1,554,045 
  10,000    5.500%, 1/01/32 (Alternative Minimum Tax) - AMBAC Insured    1/12 at 100.00    AAA      10,492,300 
 
      Colorado - 7.6% (5.1% of Total Investments)               
 
  2,250    Canterberry Crossing Metropolitan District II, Parker, Colorado, Limited Tax General Obligation    12/12 at 100.00    N/R      2,371,905 
      Bonds, Series 2002, 7.375%, 12/01/32               
 
  1,775    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Weld County    6/11 at 100.00    Ba1      1,840,533 
      School District 6 - Frontier Academy, Series 2001, 7.375%, 6/01/31               
 
  3,250    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Montessori    5/12 at 102.00    N/R      3,405,188 
      Peaks Building Foundation, Series 2002A, 8.000%, 5/01/32               
 
  1,700    Colorado Educational and Cultural Facilities Authority, Charter School Revenue Bonds, Belle Creek    3/12 at 100.00    N/R      1,769,394 
      Education Center, Series 2002A, 7.625%, 3/15/32               
 
  3,380    Colorado Housing Finance Authority, Multifamily Project Bonds, Class I, Series 2001A-1, 5.500%,    10/11 at 100.00    AAA      3,509,420 
      4/01/31 (Alternative Minimum Tax)               
 
  10,100    Colorado Springs, Colorado, Utility System Revenue Refunding and Improvement Bonds, Series 1997A,    11/07 at 100.00    AA      10,536,219 
      5.375%, 11/15/26               
    2,000    Denver City and County, Colorado, Airport System Revenue Refunding Bonds, Series 2001A, 5.500%,   11/11 at 100.00    AAA        2,171,720 
      11/15/16 (Alternative Minimum Tax)- FGIC Insured              
      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      19,978,621 
  1,105    5.500%, 11/15/25 - MBIA Insured   11/06 at 101.00    AAA      1,146,493 
  1,000    Plaza Metropolitan District 1, Lakewood, Colorado, Tax Increment Revenue Bonds, Series 2003,   6/14 at 101.00    N/R      1,109,830 
      8.000%, 12/01/25              
      Delaware - 0.5% (0.3% of Total Investments)              
  2,835    Delaware State Housing Authority, Multifamily Mortgage Revenue Bonds, Series 2001A, 5.400%, 7/01/24   7/12 at 100.00    Aa3      2,857,000 
      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%, 10/01/29 -   10/09 at 101.00    AAA      6,527,880 
      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      2,135,780 
      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      1,142,559 
  2,195    5.450%, 12/01/41 - FSA Insured   12/11 at 100.00    AAA      2,264,296 
  4,175    Pace Property Finance Authority Inc., Florida, Utility System Improvement and Revenue Refunding   9/07 at 102.00    AAA      4,436,731 
      Bonds, Series 1997, 5.250%, 9/01/17 - AMBAC Insured              
      Georgia - 2.3% (1.5% of Total Investments)              
  5,000    Atlanta, Georgia, Airport General Revenue Bonds, Series 2000B, 5.625%, 1/01/30 (Alternative   1/10 at 101.00    AAA      5,304,000 
      Minimum Tax) - FGIC Insured              
  2,700    Atlanta, Georgia, Tax Allocation Bonds, Atlantic Station Project, Series 2001, 7.900%, 12/01/24   12/11 at 101.00    N/R      2,939,166 
  3,740    Gainesville and Hall County Hospital Authority, Georgia, Revenue Anticipation Certificates,   5/11 at 100.00    A-      3,886,309 
      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%, 2/01/30   2/10 at 101.00    AAA      2,218,620 
      (Pre-refunded to 2/01/10) - FGIC Insured              
      Hawaii - 0.9% (0.6% of Total Investments)              
  5,125    Hawaii, Highway Revenue Bonds, Series 2001, 5.375%, 7/01/21 (Pre-refunded to 7/01/11) - FSA Insured   7/11 at 100.00    AAA      5,662,203 
      Illinois - 16.9% (11.4% of Total Investments)              
  3,000    Chicago, Illinois, General Obligation Bonds, Neighborhoods Alive 21 Program, Series 2001A, 5.500%,   1/11 at 100.00    AAA      3,256,860 
      1/01/31 - FGIC Insured              
      Chicago, Illinois, General Obligation Refunding Bonds, Series 1996B:              
  1,210    5.125%, 1/01/25 (Pre-refunded to 1/01/06) - FGIC Insured   1/06 at 102.00    AAA      1,246,566 
  1,290    5.125%, 1/01/25 - FGIC Insured   1/06 at 102.00    AAA      1,324,907 
  8,375    Chicago, Illinois, Revenue Bonds, Midway Airport, Series 2001A, 5.500%, 1/01/19 (Alternative   1/11 at 101.00    AAA      9,011,835 
      Minimum Tax) - FSA Insured              
  4,950    Chicago, Illinois, Second Lien Passenger Facility Charge Revenue Bonds, O'Hare International   1/11 at 101.00    AAA      5,204,282 
      Airport, Series 2001A, 5.375%, 1/01/32 (Alternative Minimum Tax) - AMBAC Insured              
  1,750    Chicago, Illinois, Sales Tax Revenue Bonds, Series 1998, 5.250%, 1/01/28 - FGIC Insured   7/08 at 102.00    AAA      1,861,458 
  10,800    Chicago, Illinois, Sales Tax Revenue Bonds, Series 1999, 5.375%, 1/01/30 (Pre-refunded to 1/01/09) -   1/09 at 101.00    AAA      11,683,440 
      FGIC Insured              
      Chicago, Illinois, Second Lien Wastewater Transmission Revenue Bonds, Series 2001A:              
  2,220    5.500%, 1/01/16 - MBIA Insured   No Opt. Call    AAA      2,520,721 
  8,610    5.500%, 1/01/26 (Pre-refunded to 1/01/11) - AMBAC Insured   1/11 at 100.00    AAA      9,509,401 
    10,000    Chicago, Illinois, Senior Lien Water Revenue Bonds, Series 2001, 5.000%, 11/01/26 (Pre-refunded to   11/11 at 100.00    AAA        10,863,700 
      11/01/11) - AMBAC Insured                
  2,415    Illinois Finance Authority, General Obligation Debt Certificates, Local Government Program -   12/14 at 100.00    Aaa        2,556,157 
      Kankakee County, Series 2005B, 5.000%, 12/01/24 - AMBAC Insured                
  1,100    Illinois Health Facilities Authority, Revenue Bonds, Condell Medical Center, Series 2000, 6.500%, 5/15/30   5/10 at 101.00    Baa2        1,189,430 
  15,000    Illinois Health Facilities Authority, Revenue Bonds, Loyola University Health System, Series 2001A,   7/11 at 100.00    Baa1        15,973,650 
      6.125%, 7/01/31                
  9,000    Illinois Health Facilities Authority, Revenue Bonds, Covenant Retirement Communities Inc., Series   12/11 at 101.00    BBB        9,426,510 
      2001, 5.875%, 12/01/31                
  2,000    Metropolitan Pier and Exposition Authority, Illinois, Revenue Refunding Bonds, McCormick Place   No Opt. Call    AAA        2,360,920 
      Expansion Project, Series 1998A, 5.500%, 6/15/29 - FGIC Insured                
  16,900    Metropolitan Pier and Exposition Authority, Illinois, Revenue Bonds, McCormick Place Expansion   12/09 at 101.00    AAA        18,122,039 
      Project, Series 1999A, 5.250%, 12/15/28 - FGIC Insured                
      Indiana - 5.8% (4.0% of Total Investments)                
      Clark-Pleasant Community School Building Corporation, Indiana, First Mortgage Bonds, Series 2001:                
  1,255    5.000%, 7/15/21 - AMBAC Insured   1/12 at 100.00    AAA        1,331,756 
  1,000    5.000%, 1/15/26 - AMBAC Insured   1/12 at 100.00    AAA        1,034,830 
      Evansville Vanderburgh Public Library Lease Corporation, Indiana, First Mortgage Bonds, Series                
      2001:                
  2,000    5.750%, 7/15/18 (Pre-refunded to 1/15/12) - MBIA Insured   1/12 at 100.00    AAA        2,257,320 
  2,750    5.125%, 1/15/24 (Pre-refunded to 1/15/12) - MBIA Insured   1/12 at 100.00    AAA        3,005,200 
  3,435    Gary, Indiana, GNMA/FHA Mortgage Revenue Bonds, Windsor Square Project, Series 2001A, 5.375%,   11/11 at 102.00    AAA        3,520,497 
      10/20/41 (Alternative Minimum Tax)                
  1,250    Hamilton Southeastern Cumberland Campus School Building Corporation, Indiana, First Mortgage Bonds,   1/12 at 100.00    AAA        1,335,888 
      Series 2001, 5.125%, 1/15/23 - AMBAC Insured                
  2,800    Indiana Health Facility Financing Authority, Revenue Bonds, Community Hospitals of Indiana, Series   5/15 at 100.00    AAA        2,938,712 
      2005A, 5.000%, 5/01/35 - AMBAC Insured                
  9,500    Indiana Educational Facilities Authority, Revenue Bonds, Butler University, Series 2001, 5.500%,   2/11 at 100.00    AAA        10,324,980 
      2/01/26 - MBIA Insured                
  4,230    Indiana Finance Authority, Educational Facilities Revenue Bonds, Tudor Park Foundation, Series   6/15 at 100.00    Aa3        4,444,461 
      2005B, 5.000%, 6/01/24                
  2,650    Indianapolis, Indiana, Special Facility Revenue Bonds, United Airlines Inc., Indianapolis   11/05 at 102.00    N/R        337,859 
      Maintenance Center Project, Series 1995A, 6.500%, 11/15/31 (Alternative Minimum Tax) #                
  3,500    University of Southern Indiana, Student Fee Bonds, Series 2001H, 5.000%, 10/01/21 - AMBAC Insured   10/11 at 100.00    Aaa        3,715,705 
      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        1,295,498 
  1,090    5.500%, 7/15/22 - AMBAC Insured   1/13 at 101.00    AAA        1,215,361 
      Iowa - 5.5% (3.7% of Total Investments)                
  2,000    Iowa Finance Authority, Healthcare Revenue Bonds, Great River Medical Center, Series 2001, 5.250%,   5/11 at 100.00    AAA        2,092,220 
      5/15/31 - FSA Insured                
      Iowa Tobacco Settlement Authority, Tobacco Settlement Asset-Backed Revenue Bonds, Series 2001B:                
  28,000    5.300%, 6/01/25   6/11 at 101.00    BBB        28,715,960 
  3,950    5.600%, 6/01/35   6/11 at 101.00    BBB        4,075,887 
      Kentucky - 3.1% (2.1% of Total Investments)                
  18,500    Louisville and Jefferson County Metropolitan Sewer District, Kentucky, Sewer and Drainage System   11/11 at 101.00    AAA        19,598,160 
      Revenue Bonds, Series 2001A, 5.125%, 5/15/27 - MBIA Insured                
      Louisiana - 3.3% (2.3% of Total Investments)                
  19,890    Tobacco Settlement Financing Corporation, Louisiana, Tobacco Settlement Asset-Backed Bonds, Series   5/11 at 101.00    BBB        21,070,670 
      2001B, 5.875%, 5/15/39              
      Maine - 1.1% (0.7% of Total Investments)              
      Maine State Housing Authority, Mortgage Purchase Bonds, Series 2001B:              
    4,610    5.400%, 11/15/21 (Alternative Minimum Tax)   11/10 at 100.00    AA+        4,784,950 
  2,065    5.500%, 11/15/32 (Alternative Minimum Tax)   11/10 at 100.00    AA+      2,133,186 
      Maryland - 2.1% (1.4% of Total Investments)              
      Maryland Community Development Administration, Multifamily Housing Insured Mortgage Loans, Series              
      2001B:              
  715    5.250%, 5/15/21 (Alternative Minimum Tax)   5/11 at 100.00    Aa2      739,639 
  1,570    5.250%, 7/01/21 (Alternative Minimum Tax)   7/11 at 100.00    Aa2      1,625,201 
  10,600    Maryland Energy Financing Administration, Revenue Bonds, AES Warrior Run Project, Series 1995,   9/05 at 102.00    N/R      10,819,208 
      7.400%, 9/01/19 (Alternative Minimum Tax)              
      Massachusetts - 1.7% (1.2% of Total Investments)              
  5,000    Massachusetts Port Authority, Special Facilities Revenue Bonds, Delta Air Lines Inc., Series 2001A,   1/11 at 101.00    AAA      5,285,950 
      5.500%, 1/01/18 (Alternative Minimum Tax) - AMBAC Insured              
  345    Massachusetts Housing Finance Agency, Single Family Housing Revenue Bonds, Series 71, 5.650%,   6/09 at 100.00    AAA      347,594 
      6/01/31 (Alternative Minimum Tax)- FSA Insured              
  5,000    Massachusetts Turnpike Authority, Metropolitan Highway System Revenue Bonds, Senior Series 1997A,   1/07 at 102.00    AAA      5,133,150 
      5.000%, 1/01/37 - MBIA Insured              
      Michigan - 9.1% (6.2% of Total Investments)              
  15,000    Detroit City School District, Wayne County, Michigan, Unlimited Tax School Building and Site   No Opt. Call    AAA      18,757,650 
      Improvement Bonds, Series 2001A, 6.000%, 5/01/29 - FSA Insured              
  11,000    Kent Hospital Finance Authority, Michigan, Revenue Bonds, Spectrum Health, Series 2001A, 5.500%,   7/11 at 101.00    AA***      12,263,680 
      1/15/31 (Pre-refunded to 7/15/11)              
  1,235    Michigan State Building Authority, Revenue Bonds, Facilities Program, Series 2001I, 5.500%, 10/15/18   10/11 at 100.00    AA-      1,362,687 
  3,485    Michigan State Hospital Finance Authority, Hospital Revenue Refunding Bonds, Sisters of Mercy   No Opt. Call    AAA      3,816,528 
      Health Corporation, Series 1993P, 5.375%, 8/15/14 - 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+      1,483,006 
  2,500    5.625%, 11/15/31   11/11 at 101.00    A+      2,643,600 
  1,355    Michigan State Hospital Finance Authority, Hospital Revenue Bonds, Detroit Medical Center Obligated   8/08 at 101.00    BB-      1,235,516 
      Group, Series 1998A, 5.250%, 8/15/23              
  12,640    Royal Oak Hospital Finance Authority, Michigan, Hospital Revenue Bonds, William Beaumont Hospital,   11/11 at 100.00    AAA      13,295,258 
      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      2,550,388 
      Sanitary Sewerage System 3, Series 2001, 5.100%, 5/01/31 - FGIC Insured              
      Minnesota - 0.4% (0.3% of Total Investments)              
  2,360    Dakota County Community Development Agency, Minnesota, GNMA Collateralized Multifamily Housing   10/11 at 105.00    Aaa      2,526,734 
      Revenue Bonds, Rose Apartments Project, Series 2001, 6.350%, 10/20/37 (Alternative Minimum Tax)              
      Mississippi - 0.4% (0.2% of Total Investments)              
  2,155    Mississippi Business Finance Corporation, GNMA Collateralized Retirement Facility Mortgage Revenue   5/09 at 103.00    AAA      2,282,317 
      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      2,059,360 
      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        3,639,285 
  3,510    5.250%, 12/01/20 - MBIA Insured   12/11 at 100.00    AAA      3,804,419 
  3,695    5.250%, 12/01/21 - MBIA Insured   12/11 at 100.00    AAA      4,004,937 
  2,040    5.250%, 12/01/22 - MBIA Insured   12/11 at 100.00    AAA      2,206,321 
 
      Montana - 0.8% (0.6% of Total Investments)              
 
  5,000    Montana Board of Investments, Exempt Facility Revenue Bonds, Stillwater Mining Company Project,   7/10 at 101.00    B1      5,240,400 
      Series 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      2,655,658 
  3,460    5.375%, 9/01/32 (Alternative Minimum Tax)   9/11 at 100.00    AAA      3,558,299 
 
      Nevada - 7.8% (5.3% 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      37,924,950 
      MBIA Insured              
 
  2,000    Director of Nevada State Department of Business and Industry, Revenue Bonds, Las Vegas Monorail   1/10 at 100.00    AAA      2,120,360 
      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 Monorail   1/10 at 102.00    N/R      4,193,240 
      Project, Second Tier, Series 2000, 7.375%, 1/01/40              
 
  470    Nevada Housing Division, Single Family Mortgage Bonds, Senior Series 1998A-1, 5.300%, 4/01/18   4/08 at 101.50    Aaa      483,917 
      (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      4,595,963 
      FGIC Insured              
 
      New Hampshire - 0.4% (0.2% of Total Investments)              
 
  2,000    New Hampshire Health and Education Authority, Hospital Revenue Bonds, Concord Hospital, Series   10/11 at 101.00    Aaa      2,203,560 
      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 Company,   11/12 at 101.00    Aaa      10,581,000 
      Series 2002A, 5.250%, 11/01/32 (Alternative Minimum Tax) - AMBAC Insured              
 
  4,125    New Jersey Transit Corporation, Certificates of Participation, Federal Transit Administration   No Opt. Call    AAA      4,624,372 
      Grants, Series 2002A, 5.500%, 9/15/13 - AMBAC Insured              
 
      New York - 5.2% (3.5% of Total Investments)              
 
  1,780    East Rochester Housing Authority, New York, GNMA Secured Revenue Bonds, Gates Senior Housing Inc.,   10/11 at 101.00    AAA      1,850,648 
      Series 2001, 5.300%, 4/20/31              
 
  5,350    Metropolitan Transportation Authority, New York, Dedicated Tax Fund Bonds, Series 2001A, 5.000%,   11/11 at 100.00    AAA      5,845,357 
      11/15/31 (Pre-refunded to 11/15/11) - FGIC Insured              
 
  4,155    Monroe County Airport Authority, New York, Revenue Refunding Bonds, Greater Rochester International   No Opt. Call    AAA      4,610,804 
      Airport, Series 1999, 5.750%, 1/01/13 (Alternative Minimum Tax) - MBIA Insured              
 
  2,500    New York City, New York, General Obligation Bonds, Fiscal Series 2002G, 5.625%, 8/01/20 - MBIA Insured   8/12 at 100.00    AAA      2,796,250 
 
      New York City Municipal Water Finance Authority, New York, Water and Sewerage System Revenue Bonds,              
      Fiscal Series 2001A:              
  8,610    5.500%, 6/15/33 - MBIA Insured   6/10 at 101.00    AAA      9,395,663 
  5,710    5.500%, 6/15/33 - FGIC Insured   6/10 at 101.00    AAA      6,231,038 
 
  2,000    New York State Tobacco Settlement Financing Corporation, Tobacco Settlement Asset-Backed and State   6/11 at 100.00    AA-      2,212,260 
      Contingency Contract-Backed Bonds, Series 2003B-1C, 5.500%, 6/01/16              
 
      North Carolina - 0.3% (0.2% of Total Investments)              
    1,800    North Carolina Municipal Power Agency 1, Catawba Electric Revenue Bonds, Series 2003A, 5.500%, 1/01/13   No Opt. Call    A3        1,988,262 
      Ohio - 2.6% (1.8% of Total Investments)              
  4,325    Ohio Housing Finance Agency, GNMA Mortgage-Backed Securities Program Residential Mortgage Revenue   3/08 at 101.50    AAA      4,454,361 
      Bonds, Series 1998A-1, 5.300%, 9/01/19 (Alternative Minimum Tax) - FSA Insured              
  7,800    Ohio Water Development Authority, Solid Waste Disposal Revenue Bonds, Bay Shore Power, Series   9/09 at 102.00    N/R      8,114,652 
      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      1,990,596 
  1,775    5.000%, 12/01/23 - FGIC Insured   12/11 at 100.00    AAA      1,877,808 
      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      2,730,400 
      Series 1999A, 5.625%, 8/15/29 (Pre-refunded to 8/15/09)              
      Oregon - 2.5% (1.7% of Total Investments)              
  4,700    Oregon Health, Housing, Educational and Cultural Facilities Authority, Revenue Bonds, PeaceHealth   11/11 at 101.00    AAA      5,027,919 
      Project, Series 2001, 5.250%, 11/15/21 - AMBAC Insured              
  10,000    Oregon Housing and Community Services Department, Multifamily Housing Revenue Bonds, Series 2000A,   7/10 at 100.00    Aaa      10,406,300 
      6.050%, 7/01/42 (Alternative Minimum Tax)              
      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    B1      2,413,120 
  2,000    9.250%, 11/15/30   11/10 at 102.00    B1      2,403,900 
  3,500    Pennsylvania Economic Development Financing Authority, Senior Lien Resource Recovery Revenue Bonds,   1/06 at 100.00    BB      3,551,415 
      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      3,618,958 
      8/01/16 (Pre-refunded to 8/01/12) - FGIC Insured              
      South Carolina - 1.6% (1.1% of Total Investments)              
  2,185    Greenville County, South Carolina, Special Source Revenue Bonds, Road Improvement Project, Series   4/11 at 101.00    AAA      2,406,909 
      2001, 5.500%, 4/01/21 - AMBAC Insured              
  6,850    South Carolina Transportation Infrastructure Bank, Revenue Bonds, Series 2001A, 5.500%, 10/01/22   10/11 at 100.00    Aaa      7,630,352 
      (Pre-refunded to 10/01/11) - AMBAC Insured              
      Tennessee - 1.4% (0.9% of Total Investments)              
  5,210    Memphis-Shelby County Airport Authority, Tennessee, Airport Revenue Bonds, Series 2001A, 5.500%,   3/11 at 100.00    AAA      5,620,444 
      3/01/14 (Alternative Minimum Tax)- FSA Insured              
  1,455    Tennessee Housing Development Agency, Homeownership Program Bonds, Series 1998-2, 5.350%, 7/01/23   1/09 at 101.00    AA      1,498,810 
      (Alternative Minimum Tax)              
  1,575    Tennessee Housing Development Agency, Homeownership Program Bonds, Series 2001-3A, 5.200%, 7/01/22   7/11 at 100.00    AA      1,625,668 
      (Alternative Minimum Tax)              
      Texas - 17.9% (12.1% of Total Investments)              
  1,125    Brushy Creek Municipal Utility District, Williamson County, Texas, Combination Unlimited Tax and   6/09 at 100.00    Aaa      1,180,181 
      Revenue Refunding Bonds, Series 2001, 5.125%, 6/01/26 - FSA Insured              
  3,850    Dallas-Ft. Worth International Airport, Texas, Joint Revenue Refunding and Improvement Bonds,   11/11 at 100.00    AAA      4,081,501 
      Series 2001A, 5.500%, 11/01/35 (Alternative Minimum Tax) - FGIC Insured              
  5,000    Decatur Hospital Authority, Texas, Revenue Bonds, Wise Regional Health System, Series 2004A,   9/14 at 100.00    N/R      5,526,750 
      7.000%, 9/01/25              
      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        2,015,757 
  2,005    5.000%, 2/15/21 - FGIC Insured   2/11 at 100.00    AAA      2,118,062 
 
  4,040    Harris County, Texas, Tax and Revenue Certificates of Obligation, Series 2001, 5.000%, 8/15/27   8/11 at 100.00    AA+      4,203,216 
 
  7,000    Houston, Texas, Subordinate Lien Airport System Revenue Bonds, Series 1998B, 5.250%, 7/01/14   7/08 at 101.00    AAA      7,381,500 
      (Alternative Minimum Tax) - FGIC Insured              
 
      Houston, Texas, Subordinate Lien Airport System Revenue Refunding Bonds, Series 2001A:              
  2,525    5.500%, 7/01/13 (Alternative Minimum Tax) - FGIC Insured   1/12 at 100.00    AAA      2,727,909 
  2,905    5.500%, 7/01/14 (Alternative Minimum Tax) - FGIC Insured   1/12 at 100.00    AAA      3,167,583 
 
  6,000    Houston, Texas, Junior Lien Water and Sewerage System Revenue Refunding Bonds, Series 2001B,   No Opt. Call    AAA      7,104,840 
      5.500%, 12/01/29 - MBIA Insured              
 
      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      8,988,240 
  8,500    5.500%, 8/15/41 - AMBAC Insured   8/11 at 100.00    AAA      9,118,970 
 
  10,700    Laredo Independent School District, Webb County, Texas, General Obligation Refunding Bonds, Series   8/11 at 100.00    AAA      11,224,300 
      2001, 5.000%, 8/01/25              
 
  2,500    Matagorda County Navigation District 1, Texas, Collateralized Revenue Refunding Bonds, Houston   No Opt. Call    AAA      2,744,300 
      Light and Power Company, Series 1997, 5.125%, 11/01/28 (Alternative Minimum Tax) - AMBAC Insured              
 
  1,540    Medina Valley Independent School District, Medina County, Texas, General Obligation Bonds, Series   2/11 at 100.00    Aaa      1,617,262 
      2001, 5.250%, 2/15/26              
 
  5,430    Mineral Wells Independent School District, Pale Pinto and Parker Counties, Texas, Unlimited School   2/08 at 100.00    Aaa      5,519,867 
      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      3,183,870 
      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, Series   10/11 at 100.00    AAA      3,305,439 
      2001B, 5.500%, 10/01/17 (Alternative Minimum Tax) - FGIC Insured              
 
  10,915    Texas Department of Housing and Community Affairs, Residential Mortgage Revenue Bonds, Series   7/11 at 100.00    AAA      11,221,384 
      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      16,135,047 
      5.125%, 7/15/18              
 
      Utah - 1.0% (0.6% of Total Investments)              
 
      Utah Housing Corporation, Single Family Mortgage Bonds, Series 2001E:              
  2,055    5.200%, 1/01/18 (Alternative Minimum Tax)   7/11 at 100.00    AA-      2,088,394 
  630    5.500%, 1/01/23 (Alternative Minimum Tax)   7/11 at 100.00    Aa2      650,670 
 
      Utah Housing Corporation, Single Family Mortgage Bonds, Series 2001F-1:              
  2,575    4.950%, 7/01/18 (Alternative Minimum Tax)   7/11 at 100.00    Aa2      2,598,046 
  650    5.300%, 7/01/23 (Alternative Minimum Tax)   7/11 at 100.00    AA-      653,510 
 
      Virginia - 0.9% (0.6% of Total Investments)              
 
  7,000    Pocahontas Parkway Association, Virginia, Senior Lien Revenue Bonds, Route 895 Connector Toll Road,   8/08 at 77.58    BB      4,595,920 
      Series 1998B, 0.000%, 8/15/13              
 
  990    Virginia Housing Development Authority, Commonwealth Mortgage Bonds, Series 2001J-1, 5.200%,   9/05 at 100.00    AAA      997,930 
      7/01/19 (Pre-refunded to 9/01/05) - MBIA Insured              
 
      Washington - 15.8% (10.7% 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      1,093,150 
  2,000    5.600%, 12/01/36 - MBIA Insured   12/11 at 100.00    Aaa      2,197,460 
 
  2,090    Public Utility District 1, Benton County, Washington, Electric Revenue Refunding Bonds, Series   11/11 at 100.00    AAA      2,323,181 
      2001A, 5.625%, 11/01/15 - FSA Insured              
 
  1,500    Grays Harbor County Public Utility District 1, Washington, Electric System Revenue Bonds, Series   1/11 at 100.00    AAA      1,594,245 
      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       2,574,965
      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     13,666,229
      12/01/16 (Alternative Minimum Tax)- AMBAC Insured          
      Port of Seattle, Washington, Revenue Bonds, Series 2001B:          
  2,535    5.625%, 4/01/18 (Alternative Minimum Tax) - FGIC Insured   10/11 at 100.00    AAA     2,769,031
  16,000    5.100%, 4/01/24 (Alternative Minimum Tax) - FGIC Insured   10/08 at 100.00    AAA     16,279,840
  5,680    Seattle, Washington, Municipal Light and Power Revenue Refunding and Improvement Bonds, Series   3/11 at 100.00    AAA     6,196,255
      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     4,880,849
      AMBAC Insured          
  2,250    Washington, Certificates of Participation, Washington Convention and Trade Center, Series 1999,   7/09 at 100.00    AAA     2,401,155
      5.250%, 7/01/14 - MBIA Insured          
      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     3,248,766
  2,915    5.375%, 12/01/18 - AMBAC Insured   12/11 at 101.00    AAA     3,144,673
  3,720    Washington State Healthcare Facilities Authority, Revenue Bonds, Children's Hospital and Regional   10/11 at 100.00    Aaa     4,029,876
      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     5,902,453
  25,435    5.625%, 10/01/31 - RAAI Insured   10/11 at 101.00    AA     27,182,130
      Wisconsin - 5.0% (3.4% 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     4,032,448
  1,850    5.000%, 1/01/21 - FGIC Insured   1/12 at 100.00    Aaa     1,964,793
  1,735    Evansville Community School District, Dane, Green and Rock Counties, Wisconsin, General Obligation   4/11 at 100.00    AAA     1,920,957
      Refunding Bonds, Series 2001, 5.500%, 4/01/20 (Pre-refunded to 4/01/11) - FGIC Insured          
  12,250    La Crosse, Wisconsin, Pollution Control Revenue Refunding Bonds, Dairyland Power Cooperative,   12/08 at 102.00    AAA     13,233,063
      Series 1997B, 5.550%, 2/01/15 - AMBAC Insured          
  3,180    Wisconsin, Clean Water Revenue Bonds, Series 1999-1, 5.500%, 6/01/17 (Pre-refunded to 6/01/09)   6/09 at 100.00    AA+***     3,450,713
  4,000    Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Froedtert and Community   10/11 at 101.00    AA-     4,186,036
      Health Obligated Group, Series 2001, 5.375%, 10/01/30          
  2,500    Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Marshfield Clinic, Series   2/12 at 100.00    BBB+     2,667,295
      2001B, 6.000%, 2/15/25          
$   874,725    Total Long-Term Investments (cost $875,464,011) - 147.4%           927,587,114
      Short-Term Investments - 0.6% (0.4% of Total Investments)          
  3,000    Clark County School District, Nevada, General Obligation Bonds, Variable Rate Demand Obligations,       A-1+     3,000,000
      Series 2001A, 2.220%, 6/15/21 - FSA Insured †          
  960    Clark County School District, Nevada, General Obligation Bonds, Variable Rate Demand Obligations,       A-1+     960,000
      Series 2001B, 2.190%, 6/15/21 - FSA Insured †          
$   3,960    Total Short-Term Investments (cost $3,960,000)           3,960,000
      Total Investments (cost $879,424,011) - 148.0%           931,547,114
      Other Assets Less Liabilities - 1.6%           9,918,507
      Preferred Shares, at Liquidation Value - (49.6)%           (312,000,000)
     Net Assets Applicable to Common Shares - 100%             $   629,465,621 

(1 )    All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares 
    unless otherwise noted. 
*     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. 
**     Ratings: Using the higher of Standard & Poor's or Moody's rating. 
***     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. 
N/R     Investment is not rated. 
#     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. 
†     Security has a maturity of more than one year, but has variable rate and demand features which qualify it as 
    a short-term security. The rate disclosed is that in effect at the end of the reporting period. This rate changes 
    periodically based on market conditions or a specified market index. 
(a)     The issuer has received a preliminary adverse determination from the Internal Revenue Service (the “IRS”) 
    regarding the tax-exempt status of the bonds’ coupon payments. The Fund will continue to treat coupon 
    payments as tax-exempt income until such time that it is formally determined that the interest on the bonds 
    should be treated as taxable. 
 
    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 income on taxable market 
    discount securities and timing differences in recognizing certain gains and losses on investment transactions. 
 
    At July 31, 2005, the cost of investments was $879,264,206. 
 
    Gross unrealized appreciation and gross unrealized depreciation of investments at July 31, 2005, were as 
    follows: 

            Gross unrealized:       
            Appreciation        $53,812,976  
            Depreciation      (1,530,068 ) 
 
             Net unrealized appreciation of investments        $52,282,908  

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--Vice President and Secretary        

Date         09/29/05        

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--Chief Administrative Officer (principal executive officer)        

Date         09/29/05        

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

Date         09/29/05        

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