Palestinian policemen fired their rifles in salute to the three men.
The officials said the troops fired live ammunition only after being hit by rifle fire from Palestinian policemen.
Palestinian policemen, working with the Israelis, restored calm only after hours of fighting.
Two Palestinian policemen left the church and surrendered today.
"We didn't raise the issue of how to identify Palestinian policemen," the soldier was quoted as saying.
Maariv's headline said 15 Palestinian policemen were killed that night.
At the same time, Israel has praised the care with which Palestinian policemen were doing their job.
Dozens of Palestinian policemen stood by, but there were no incidents, the sources said.
"I feel confused," a Palestinian policeman, who left his post once the gunfire began, told a local reporter.
In the end, the Palestinian policeman calmly prevailed and we turned around.