The helicopter suffered a "catastrophic loss of power" and ended up upside down in the sea, triggering a massive rescue operation.
The Super Puma L2 went down on Friday evening, around two miles west of Sumburgh airport, as it was returning to Shetland from the Borgsten Dolphin platform. It was carrying 16 workers and two crew.
"The bodies of three people have been recovered and work is underway to recover the body of the fourth person," Police Scotland said in a statement.
All the families have been informed.
A search operation involving coastguard, police, Royal Air Force (RAF) and local lifeboats was able to rescue 14 people from the sea, including the two crew, and they were taken to Gilbert Bain Hospital in Lerwick.
"Five were discharged and nine detained overnight either for observation or suffering from exposure," the police statement said.
The helicopter is reported to be in several pieces but the wreckage has now been secured by the Royal National Lifeboat Institution.
CHC, the aircraft's Canada-based operator, said it was flying for French oil company Total.
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