According to officials, the mishap occurred at around 1.00 P.M. On the Shimla-Kalka narrow gauge route near Parwanoo between the Kalka and Taksal stations.
The Great Railway Journey chartered train had 37 passengers aboard, all from Britain.
While two victims, women aged about 35 and 65 years, died on the spot, reports in Chandigarh said that one of the injured passengers had died at a hospital there.
Railway authorities from Ambala and officers of Solan district administration rushed to the spot and all the injured have been taken to hospital and provided medical aid, he said.
The cause of the accident could not be immediately ascertained but experts suspect that it might have occurred due to over-speeding.
A senior Northern Railway official said that two of the passengers were seriously injured in the derailment.
An inquiry is being ordered into the derailment incident and senior officials, including Railway Board Member (Engineering) VK Gupta and Northern Railway General Manager AK Puthia have rushed to the spot, said the official.
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