Violence broke out when police tried to stop the construction in Dessie, 250km (155 miles) north-east of Addis Ababa.
The police say they were responding to an attack on them by the Christians, but campaign groups say the police ambushed the workers.
The population of Dessie is about two-thirds Christian, one-third Muslim.
Information Minister Bereket Simon told reporters that the Christians had "stormed the place" and tried to continue building the church "unlawfully".
"Unfortunately three lives have been claimed. Two of them were killed by bullets, one of them fell off a cliff," he said.
Several other people were also hurt in the violence. Source: BBC
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