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         811-21153         

        Nuveen Maryland Dividend Advantage Municipal Fund 3         
(Exact name of registrant as specified in charter)

Nuveen Investments
        333 West Wacker Drive, Chicago, Illinois 60606         
(Address of principal executive offices) (Zip code)


Kevin J. McCarthy 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:            5/31          

Date of reporting period:         8/31/08         

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 Maryland Dividend Advantage Municipal Fund 3 (NWI)             
    August 31, 2008             
Principal        Optional Call         
Amount (000)    Description (1)    Provisions (2)    Ratings (3)    Value 
    Consumer Discretionary – 3.9% (2.5% of Total Investments)             
$         2,385    Baltimore, Maryland, Senior Lien Convention Center Hotel Revenue Bonds, Series 2006A, 5.250%,    9/16 at 100.00    BBB–   $   2,048,453 
     9/01/39 – XLCA Insured             
380    Baltimore, Maryland, Subordinate Lien Convention Center Hotel Revenue Bonds, Series 2006B,    9/16 at 100.00    Ba1    333,708 
     5.875%, 9/01/39             
700    Maryland Economic Development Corporation, Revenue Bonds, Chesapeake Bay Hyatt Conference    12/16 at 100.00    N/R    524,461 
     Center, Series 2006A, 5.000%, 12/01/31             
3,465    Total Consumer Discretionary            2,906,622 
    Consumer Staples – 3.2% (2.0% of Total Investments)             
2,515    Puerto Rico, The Children’s Trust Fund, Tobacco Settlement Asset-Backed Refunding Bonds,    5/12 at 100.00    BBB    2,339,528 
     Series 2002, 5.375%, 5/15/33             
    Education and Civic Organizations – 12.3% (7.8% of Total Investments)             
225    Anne Arundel County, Maryland, Economic Development Revenue Bonds, Community College Project,    9/12 at 102.00    A3    228,659 
     Series 2002, 5.125%, 9/01/22             
625    Frederick County, Maryland, Educational Facilities Revenue Bonds, Mount Saint Mary’s College,    9/16 at 100.00    BBB–    591,319 
     Series 2006, 5.625%, 9/01/38             
690    Hartford County, Maryland, Economic Development Revenue Bonds, Battelle Memorial Institute,    4/14 at 100.00    A+    696,948 
     Series 2004, 5.250%, 4/01/34             
625    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Goucher College,    7/14 at 100.00    A–    617,456 
     Series 2004, 5.125%, 7/01/34             
1,000    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Johns Hopkins    7/12 at 100.00    AA    1,005,480 
     University, Series 2002A, 5.000%, 7/01/32             
925    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Maryland Institute    6/16 at 100.00    Baa1    842,620 
     College of Art, Series 2006, 5.000%, 6/01/30             
625    Maryland Industrial Development Financing Authority, Revenue Bonds, Our Lady of Good Counsel    5/15 at 100.00    N/R    612,319 
     High School, Series 2005A, 6.000%, 5/01/35             
710    Montgomery County Revenue Authority, Maryland, Lease Revenue Bonds, Montgomery College Arts    5/15 at 100.00    A1    752,586 
     Center Project, Series 2005A, 5.000%, 5/01/18             
1,000    Morgan State University, Maryland, Student Tuition and Fee Revenue Bonds, Academic Fees and    7/13 at 100.00    A+    1,005,050 
     Auxiliary Facilities, Series 2003A, 5.000%, 7/01/32 – FGIC Insured             
985    University of Maryland, Auxiliary Facility and Tuition Revenue Bonds, Series 2001B,    4/11 at 100.00    AA+    997,736 
     4.625%, 4/01/21             
800    University of Maryland, Auxiliary Facility and Tuition Revenue Bonds, Series 2006A,    10/16 at 100.00    AA+    846,288 
     5.000%, 10/01/22             
890    Westminster, Maryland, Educational Facilities Revenue Bonds, McDaniel College, Series 2006,    11/16 at 100.00    BBB+    820,010 
     5.000%, 11/01/31             
9,100    Total Education and Civic Organizations            9,016,471 
    Health Care – 28.3% (18.1% of Total Investments)             
700    Maryland Health and Higher Education Facilities Authority, Revenue Bonds, University of    7/16 at 100.00    A    663,012 
     Maryland Medical System, Series 2006, 5.000%, 7/01/31             
1,000    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Anne Arundel    1/09 at 101.00    AAA    1,001,060 
     Medical Center, Series 1998, 5.125%, 7/01/33 – FSA Insured             
775    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Calvert Memorial    7/14 at 100.00    A2    778,581 
     Hospital, Series 2004, 5.500%, 7/01/36             
1,250    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Carroll County    7/12 at 100.00    Baa1    1,253,163 
     General Hospital, Series 2002, 5.800%, 7/01/32             
1,750    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Carroll Hospital    7/16 at 100.00    Baa1    1,540,700 
     Center, Series 2006, 5.000%, 7/01/40             
870    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Civista Medical    7/14 at 100.00    A3    744,955 
     Center, Series 2005, 5.000%, 7/01/37 – RAAI Insured             
885    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Doctors Community    7/17 at 100.00    Baa2    795,996 
     Hospital, Series 2007A, 5.000%, 7/01/29             
700    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Frederick Memorial    7/12 at 100.00    Baa1    658,679 
     Hospital, Series 2002, 5.125%, 7/01/35             
800    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Greater Baltimore    7/11 at 100.00    A+    751,400 
     Medical Center, Series 2001, 5.000%, 7/01/34 – MBIA Insured             
1,000    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Johns Hopkins    5/11 at 100.00    A+    1,014,090 
     Hospital, Series 2001, 5.000%, 5/15/21             
735    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Johns Hopkins    7/14 at 100.00    AA    758,204 
     Hospital, Series 2004, Inverse 1003, 10.840%, 7/01/33 (IF)             
1,000    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Kennedy Krieger    7/13 at 100.00    Baa3    948,730 
     Institute, Series 2003, 5.500%, 7/01/33             
595    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, LifeBridge Health    7/17 at 100.00    AAA    608,185 
     System, Series 2008, 5.000%, 7/01/28 – AGC Insured             
900    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, MedStar Health,    8/14 at 100.00    A–    905,400 
     Series 2004, 5.375%, 8/15/24             
1,690    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, MedStar Health,    5/16 at 100.00    AAA    1,692,721 
     Series 2007, 5.250%, 5/15/46 – BHAC Insured             
    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Mercy Medical             
    Center Project, Series 2007A:             
525     5.000%, 7/01/37    7/17 at 100.00    BBB    460,504 
340     5.500%, 7/01/42    7/17 at 100.00    BBB    319,433 
650    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Mercy Medical    7/11 at 100.00    BBB    640,088 
     Center, Series 2001, 5.625%, 7/01/31             
850    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Peninsula Regional    7/16 at 100.00    A    805,358 
     Medical Center, Series 2006, 5.000%, 7/01/36             
1,845    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Union Hospital of    7/12 at 100.00    A3    1,853,672 
     Cecil County, Series 2002, 5.625%, 7/01/32             
1,220    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Washington County    1/18 at 100.00    BBB–    1,186,218 
     Hospital, Series 2008, 5.750%, 1/01/38             
775    Maryland Health and Higher Educational Facilities Authority, Revenue Refunding Bonds,    1/13 at 101.00    Baa2    774,930 
     Adventist Healthcare, Series 2003A, 5.750%, 1/01/25             
900    Prince George’s County, Maryland, Revenue Bonds, Dimensions Health Corporation, Series 1994,    1/09 at 100.00    B3    690,993 
     5.300%, 7/01/24             
21,755    Total Health Care            20,846,072 
    Housing/Multifamily – 14.2% (9.1% of Total Investments)             
980    Maryland Community Development Administration, Housing Revenue Bonds, Series 2002B, 4.950%,    7/12 at 100.00    Aa2    855,922 
     7/01/32 (Alternative Minimum Tax)             
1,250    Maryland Economic Development Corporation, Senior Lien Student Housing Revenue Bonds,    10/13 at 100.00    B2    1,102,463 
     University of Maryland – Baltimore, Series 2003A, 5.625%, 10/01/23             
    Maryland Economic Development Corporation, Student Housing Revenue Bonds, Sheppard Pratt             
    University Village, Series 2001:             
20     5.875%, 7/01/21 – ACA Insured    7/11 at 101.00    N/R    19,541 
150     6.000%, 7/01/33 – ACA Insured    7/11 at 101.00    N/R    137,447 
475    Maryland Economic Development Corporation, Student Housing Revenue Refunding Bonds, University    6/16 at 100.00    Baa2    419,116 
     of Maryland College Park Projects, Series 2006, 5.000%, 6/01/33 – CIFG Insured             
    Montgomery County Housing Opportunities Commission, Maryland, Multifamily Housing Development             
    Bonds, Series 2002B:             
515     5.100%, 7/01/33 (Alternative Minimum Tax)    7/12 at 100.00    Aaa    457,923 
3,000     5.200%, 7/01/44 (Alternative Minimum Tax)    7/12 at 100.00    Aaa    2,635,919 
4,860    Prince George’s County Housing Authority, Maryland, GNMA Collateralized Mortgage Revenue    11/12 at 100.00    AAA    4,814,898 
     Bonds, Fairview and Hillside Projects, Series 2002A, 4.700%, 11/20/22             
11,250    Total Housing/Multifamily            10,443,229 
    Housing/Single Family – 7.4% (4.8% of Total Investments)             
350    Maryland Community Development Administration Department of Housing and Community Development,    3/17 at 100.00    Aa2    320,268 
     Residential Revenue Bonds, Series 2007H, 5.000%, 9/01/27 (Alternative Minimum Tax)             
1,280    Maryland Community Development Administration Department of Housing and Community Development,    9/18 at 100.00    Aa2    1,285,402 
     Residential Revenue Bonds, Series 2008C, 5.375%, 9/01/39 (WI/DD, Settling 9/04/08)             
595    Maryland Community Development Administration, Department of Housing and Community    9/15 at 100.00    Aa2    541,843 
     Development, Residential Revenue Bonds, Series 2006F, 4.900%, 9/01/26 (Alternative Minimum Tax)             
1,200    Maryland Community Development Administration, Department of Housing and Community    3/16 at 100.00    Aa2    1,089,444 
     Development, Residential Revenue Bonds, Series 2006I, 4.875%, 9/01/26 (Alternative Minimum Tax)             
815    Maryland Community Development Administration, Department of Housing and Community    9/16 at 100.00    Aa2    717,021 
     Development, Residential Revenue Bonds, Series 2006L, 4.900%, 9/01/31 (Alternative Minimum Tax)             
620    Maryland Community Development Administration, Department of Housing and Community    3/17 at 100.00    Aa2    529,325 
     Development, Residential Revenue Bonds, Series 2007D, 4.850%, 9/01/37 (Alternative Minimum Tax)             
190    Maryland Community Development Administration, Residential Revenue Bonds, Series 2005E,    9/14 at 100.00    Aa2    162,501 
     4.900%, 9/01/36 (Alternative Minimum Tax)             
400    Montgomery County Housing Opportunities Commission, Maryland, Single Family Mortgage Revenue    7/15 at 100.00    Aa2    347,612 
     Bonds, Series 2005D, 5.000%, 7/01/36             
570    Montgomery County Housing Opportunities Commission, Maryland, Single Family Mortgage Revenue    1/16 at 100.00    Aa2    472,285 
     Bonds, Series 2006B, 4.700%, 7/01/37             
6,020    Total Housing/Single Family            5,465,701 
    Industrials – 2.0% (1.3% of Total Investments)             
510    Maryland Economic Development Corporation, Solid Waste Disposal Revenue Bonds, Waste    4/12 at 101.00    BBB    468,858 
     Management Inc., Series 2002, 4.600%, 4/01/16 (Alternative Minimum Tax)             
1,000    Northeast Maryland Waste Disposal Authority, Baltimore, Resource Recovery Revenue Bonds, RESCO    1/09 at 101.00    BBB    979,270 
     Retrofit Project, Series 1998, 4.750%, 1/01/12 (Alternative Minimum Tax)             
1,510    Total Industrials            1,448,128 
    Long-Term Care – 3.4% (2.2% of Total Investments)             
1,050    Baltimore County, Maryland, Revenue Bonds, Oak Crest Village, Series 2007A, 5.000%, 1/01/37    1/17 at 100.00    BBB+    948,560 
400    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Edenwald, Series    7/16 at 100.00    N/R    369,860 
     2006A, 5.400%, 1/01/31             
    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, King Farm             
    Presbyterian Community, Series 2007A:             
280     5.000%, 1/01/17    No Opt. Call    N/R    264,712 
520     5.250%, 1/01/27    1/17 at 100.00    N/R    437,154 
540    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Mercy Ridge    7/17 at 100.00    BBB+    453,119 
     Retirement Community, Series 2007, 4.750%, 7/01/34             
2,790    Total Long-Term Care            2,473,405 
    Tax Obligation/General – 22.4% (14.3% of Total Investments)             
1,000    Annapolis, Maryland, General Obligation Public Improvement Refunding Bonds, Series 2002,    4/12 at 101.00    AA    1,038,860 
     4.375%, 4/01/17             
    Anne Arundel County, Maryland, General Obligation Bonds, Series 2006:             
845     5.000%, 3/01/21    3/16 at 100.00    AAA    898,193 
650     5.000%, 3/01/21    3/16 at 100.00    AAA    690,918 
380    Carroll County, Maryland, Consolidated Public Improvement Bonds, Series 2005A, 5.000%, 12/01/16    12/15 at 100.00    AA    421,751 
1,260    Charles County, Maryland, Consolidated General Obligation Public Improvement Bonds, Series    1/12 at 101.00    AA    1,315,528 
     2002, 4.400%, 1/15/16             
500    Frederick County, Maryland, General Obligation Public Facilities Bonds, Series 2006,    No Opt. Call    AA+    548,900 
     5.000%, 11/01/20             
    Frederick, Maryland, General Obligation Bonds, Series 2005:             
710     5.000%, 8/01/16 – MBIA Insured    8/15 at 100.00    AA    782,519 
535     5.000%, 8/01/17 – MBIA Insured    8/15 at 100.00    AA    575,355 
1,000    Maryland National Capital Park Planning Commission, Prince George’s County, General Obligation    1/14 at 100.00    AAA    1,079,930 
     Bonds, Park Acquisition and Development, Series 2004EE-2, 5.000%, 1/15/17             
1,850    Montgomery County, Maryland, Consolidated General Obligation Public Improvement Bonds, Series    No Opt. Call    AAA    2,062,639 
     2005A, 5.000%, 7/01/15             
1,440    Montgomery County, Maryland, Consolidated General Obligation Public Improvement Bonds, Series    No Opt. Call    AAA    1,609,848 
     2006, 5.000%, 5/01/16             
1,000    Prince George’s County, Maryland, General Obligation Consolidated Public Improvement Bonds,    10/13 at 100.00    AAA    1,075,230 
     Series 2003A, 5.000%, 10/01/17             
1,000    Prince George’s County, Maryland, General Obligation Consolidated Public Improvement Bonds,    No Opt. Call    AAA    1,076,910 
     Series 2004C, 5.000%, 12/01/11             
1,000    St. Mary’s County, Maryland, General Obligation Hospital Bonds, Series 2002, 5.000%, 10/01/12    No Opt. Call    AA    1,090,270 
1,000    Washington Suburban Sanitary District, Montgomery and Prince George’s Counties, Maryland,    6/15 at 100.00    AAA    1,105,010 
     Sewerage Disposal Bonds, Series 2005, 5.000%, 6/01/16             
1,000    Washington Suburban Sanitary District, Montgomery and Prince George’s Counties, Maryland,    6/15 at 100.00    AAA    1,105,010 
     Water Supply Bonds, Series 2005, 5.000%, 6/01/16             
15,170    Total Tax Obligation/General            16,476,871 
    Tax Obligation/Limited – 31.7% (20.3% of Total Investments)             
750    Annapolis, Maryland, Special Obligation Bonds, Park Place Project, Series 2005A,    1/15 at 101.00    N/R    634,823 
     5.350%, 7/01/34             
1,000    Baltimore Board of School Commissioners, Maryland, Revenue Bonds, City Public School System,    5/13 at 100.00    AA+    1,077,950 
     Series 2003A, 5.000%, 5/01/15             
135    Frederick County, Maryland, Lake Linganore Village Community Development Special Obligation    7/10 at 102.00    BBB+    135,543 
     Bonds, Series 2001A, 5.600%, 7/01/20 – RAAI Insured             
450    Hyattsville, Maryland, Special Obligation Bonds, University Town Center Project, Series 2004,    7/14 at 102.00    N/R    403,079 
     5.750%, 7/01/34             
5,000    Maryland Department of Transportation, Consolidated Transportation Revenue Bonds, Series 2002,    No Opt. Call    AAA    5,709,946 
     5.500%, 2/01/16             
2,200    Maryland Economic Development Corporation, Lease Revenue Bonds, Department of Transportation    6/12 at 100.50    AA+    2,233,528 
     Headquarters Building, Series 2002, 4.750%, 6/01/22             
450    Maryland Economic Development Corporation, Lease Revenue Bonds, Montgomery County Town Square    9/12 at 100.00    AA+    487,440 
     Parking Garage, Series 2002A, 5.000%, 9/15/13             
2,935    Maryland Economic Development Corporation, Lease Revenue Bonds, Montgomery County Wayne Avenue    9/12 at 100.00    AA+    3,171,355 
     Parking Project, Series 2002A, 5.250%, 9/15/16             
    Maryland Stadium Authority, Lease Revenue Bonds, Montgomery County Conference Center             
    Facilities, Series 2003:             
1,465     5.000%, 6/15/21    6/13 at 100.00    AA+    1,529,943 
1,620     5.000%, 6/15/23    6/13 at 100.00    AA+    1,683,990 
460    Prince George’s County, Maryland, Special Obligation Bonds, National Harbor Project, Series    7/15 at 100.00    N/R    393,475 
     2005, 5.200%, 7/01/34             
575    Prince George’s County, Maryland, Special Tax District Bonds, Victoria Falls Project, Series    7/13 at 100.00    N/R    465,359 
     2005, 5.250%, 7/01/35             
1,200    Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, Series 2007N, 5.250%,    No Opt. Call    AA    1,193,592 
     7/01/31 – AMBAC Insured             
    Puerto Rico Public Buildings Authority, Guaranteed Government Facilities Revenue Bonds,             
    Series 2002G:             
1,000     5.250%, 7/01/17    7/12 at 100.00    BBB–    1,013,960 
1,205     5.250%, 7/01/20    7/12 at 100.00    BBB–    1,208,856 
1,275     5.250%, 7/01/21    7/12 at 100.00    BBB–    1,276,441 
700    Puerto Rico, Highway Revenue Bonds, Highway and Transportation Authority, Series 2003AA,    No Opt. Call    AA    729,855 
     5.500%, 7/01/19 – MBIA Insured             
22,420    Total Tax Obligation/Limited            23,349,135 
    Transportation – 3.1% (2.0% of Total Investments)             
2,210    Maryland Transportation Authority, Revenue Bonds, Transportation Facilities Projects, Series    7/17 at 100.00    AAA    2,275,107 
     2007, 5.000%, 7/01/30 – FSA Insured (UB)             
    U.S. Guaranteed – 17.2% (11.0% of Total Investments) (4)             
10    Anne Arundel County, Maryland, General Obligation Bonds, Consolidated General Improvements,    5/09 at 101.00    AAA    10,334 
     Series 1999, 5.000%, 5/15/19 (Pre-refunded 5/15/09)             
255    Baltimore, Maryland, Wastewater Project Revenue Bonds, Series 2006C, 5.000%, 7/01/31    7/16 at 100.00    AA (4)    283,693 
     (Pre-refunded 7/01/16) – AMBAC Insured             
    Frederick County, Maryland, Educational Facilities Revenue Bonds, Mount St. Mary’s College,             
    Series 2001A:             
100     5.750%, 9/01/25 (Pre-refunded 3/01/10)    3/10 at 101.00    BBB– (4)    106,298 
100     5.800%, 9/01/30 (Pre-refunded 3/01/10)    3/10 at 101.00    BBB– (4)    106,372 
100    Frederick County, Maryland, General Obligation Public Facilities Bonds, Series 1999, 5.250%,    7/09 at 101.00    AAA    103,932 
     7/01/17 (Pre-refunded 7/01/09)             
110    Frederick County, Maryland, Lake Linganore Village Community Development Special Obligation    7/10 at 102.00    BBB+ (4)    118,971 
     Bonds, Series 2001A, 5.600%, 7/01/20 (Pre-refunded 7/01/10) – RAAI Insured             
280    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Collington    4/11 at 101.00    N/R (4)    311,111 
     Episcopal Life Care Community Inc., Series 2001A, 6.750%, 4/01/23 (Pre-refunded 4/01/11)             
285    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Helix Health,    No Opt. Call    AA (4)    310,214 
     Series 1997, 5.000%, 7/01/17 – AMBAC Insured (ETM)             
725    Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, LifeBridge Health    7/14 at 100.00    A (4)    796,130 
     System, Series 2004A, 5.125%, 7/01/34 (Pre-refunded 7/01/14)             
855    Maryland Transportation Authority, Revenue Refunding Bonds, Transportation Facilities    No Opt. Call    AAA    986,738 
     Projects, First Series 1978, 6.800%, 7/01/16 (ETM)             
1,525    Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2000HH, 5.250%, 7/01/29    7/10 at 101.00    AAA    1,629,432 
     (Pre-refunded 7/01/10) – FSA Insured             
3,500    Puerto Rico Infrastructure Financing Authority, Special Obligation Bonds, Series 2000A,    10/10 at 101.00    AAA    3,627,014 
     5.500%, 10/01/40             
1,000    Puerto Rico Public Finance Corporation, Commonwealth Appropriation Bonds, Series 1998A,    No Opt. Call    AAA    1,073,090 
     5.125%, 6/01/24 – AMBAC Insured (ETM)             
    Puerto Rico Public Finance Corporation, Commonwealth Appropriation Bonds, Series 2002E:             
700     5.500%, 8/01/29 (Pre-refunded 2/01/12)    2/12 at 100.00    Aaa    757,561 
235     5.500%, 8/01/29 (Pre-refunded 2/01/12)    2/12 at 100.00    AAA    254,324 
2,000    University of Maryland, Auxiliary Facility and Tuition Revenue Bonds, Series 2002A, 5.125%,    4/12 at 100.00    AA+ (4)    2,175,160 
     4/01/22 (Pre-refunded 4/01/12)             
25    Washington Suburban Sanitary District, Montgomery and Prince George’s Counties, Maryland,    6/11 at 101.00    AAA    27,023 
     General Obligation Construction Bonds, Second Series 2001, 5.000%, 6/01/17 (Pre-refunded 6/01/11)             
11,805    Total U.S. Guaranteed            12,677,397 
    Utilities – 1.7% (1.1% of Total Investments)             
1,250    Maryland Energy Financing Administration, Revenue Bonds, AES Warrior Run Project, Series 1995,    9/08 at 100.00    N/R    1,218,075 
     7.400%, 9/01/19 (Alternative Minimum Tax)             
    Water and Sewer – 5.5% (3.5% of Total Investments)             
2,570    Baltimore, Maryland, Revenue Refunding Bonds, Wastewater Projects, Series 2002A, 5.125%,    7/12 at 100.00    AA    2,574,163 
     7/01/42 – FGIC Insured             
345    Baltimore, Maryland, Wastewater Project Revenue Bonds, Series 2006C, 5.000%, 7/01/31 –    7/16 at 100.00    AA    353,746 
     AMBAC Insured             
660    Baltimore, Maryland, Wastewater Project Revenue Bonds, Series 2007D, 5.000%, 7/01/32 –    7/17 at 100.00    AA    661,828 
     AMBAC Insured             
430    Maryland Water Quality Financing Administration, Revolving Loan Fund Revenue Bonds, Series    No Opt. Call    AAA    479,945 
     2005A, 5.000%, 9/01/15             
4,005    Total Water and Sewer            4,069,682 
$       115,265    Total Investments (cost $117,132,180) – 156.3%            115,005,423 
    Floating Rate Obligations – (2.3)%            (1,657,000)
    Other Assets Less Liabilities – (1.0)%            (756,448)
    Preferred Shares, at Liquidation Value – (53.0)% (5)            (39,000,000)
    Net Assets Applicable to Common Shares – 100%          $  73,591,975 

(1)    All percentages shown in the Portfolio of Investments are based on net assets applicable to Common 
    shares unless otherwise noted. 
(2)    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. Certain mortgage-backed securities 
    may be subject to periodic principal paydowns. 
(3)    Ratings: Using the higher of Standard & Poor’s Group (“Standard & Poor’s”) or Moody’s Investor Service, 
    Inc. (“Moody’s”) rating. Ratings below BBB by Standard & Poor’s or Baa by Moody’s are considered to be 
    below investment grade. 
    The Portfolio of Investments may reflect the ratings on certain bonds insured by ACA, AMBAC, CIFG, FGIC, 
    MBIA, RAAI and XLCA as of August 31, 2008. Subsequent to August 31, 2008, and during the period this 
    Portfolio of Investments was prepared, there may have been reductions to the ratings of certain bonds 
    resulting from changes to the ratings of the underlying insurers both during the period and after period 
    end. Such reductions would likely reduce the effective rating of many of the bonds insured by that insurer 
    or insurers presented at period end. 
(4)    Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities 
    which ensure the timely payment of principal and interest. Such investments are normally considered to 
    be equivalent to AAA rated securities. 
(5)    Preferred Shares, at Liquidation Value as a percentage of total investments is (33.9)%. 
N/R    Not rated. 
WI/DD    Purchased on a when-issued or delayed delivery basis. 
(ETM)    Escrowed to maturity. 
(IF)    Inverse floating rate investment. 
(UB)    Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the 
    provisions of SFAS No. 140. 

Fair Value Measurements

During the current fiscal period, the Fund adopted the provisions of Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. In determining the value of the Fund’s investments various inputs are used. These inputs are summarized in the three broad levels listed below:

Level 1 – Quoted prices in active markets for identical securities.

Level 2 – Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3 – Significant unobservable inputs (including management’s assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the Fund’s fair value measurements as of August 31, 2008:

    Level 1    Level 2    Level 3    Total 
Investments    $ —    $115,005,423    $ —    $115,005,423 

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 taxable market discount, timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate transactions subject to SFAS No.140. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts on the Statement of Assets and Liabilities presented in the annual report, based on their federal tax basis treatment; temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset value of the Fund.

At August 31, 2008, the cost of investments was $115,479,294.

Gross unrealized appreciation and gross unrealized depreciation of investments at August 31, 2008, were as follows:

Gross unrealized:     
  Appreciation    $ 1,722,877 
  Depreciation    (3,853,701)
Net unrealized appreciation (depreciation) of investments    $(2,130,824)

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: See 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 Maryland Dividend Advantage Municipal Fund 3         

By (Signature and Title)          /s/ Kevin J. McCarthy                    
                                                  Kevin J. McCarthy
                                                  Vice President and Secretary

Date         October 30, 2008        

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                    
                                                 Gifford R. Zimmerman
                                                 Chief Administrative Officer (principal executive officer) 

Date         October 30, 2008        

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

Date        October 30, 2008