Caf cut the list of candidates down from 10, with Toure up against his Ivory Coast teammate Didier Drogba and Chelsea's Nigerian midfielder John Obi Mikel.
The winner will be named at a gala ceremony in Lagos on 9 January.
It will be decided by a poll of national team coaches from all 54 African countries.
Among those dropped from the list were Mohamed Aboutrika, the veteran Egyptian midfielder who in November steered his club Al Ahly to a fifth Champions League success inside a decade. He does however make the final shortlist for Africa-based footballer, which he won last year.
Also missing out is Jonathan Pitroipa, the star of the Burkina Faso side who fell just short at the African Nations Cup in South Africa at the start of the year and the World Cup qualifying playoffs.
Both Aboutrika and Pitroipa were expected to be the closest challengers to Toure, the favourite in a year in which there were no outstanding individual achievers.
Toure, who won the BBC African African Football Of The Year award last month , helped the Ivory Coast to World Cup qualification and reaffirmed his position as a leading figure in the English Premier League with Manchester City.
If he succeeds, Toure will become the third player to win the award three years in a row, matching the achievement of Ghana's Abedi Pele from 1991-93 and Samuel Eto'o from 2003 to 2005.
John Obi Mikel is nominated on the back of his role in helping Nigeria to win the Nations Cup at the start of 2013.
Drogba is a two-time winner but the Galatasaray striker is a surprise finalist this time round after a year in which he was dropped by the Ivory Coast national team.
Caf African Player of the Year nominees:
- Didier Drogba - Galatasaray (Turkey) and Ivory Coast
- John Mikel Obi - Chelsea (England) and Nigeria
- Yaya Toure - Manchester City (England) and Ivory Coast
African Player of the Year - Based in Africa - nominees:
- Mohamed Aboutrika - Al Ahly (Egypt) and Egypt
- Ahmed Fathy - Al Ahly (Egypt) and Egypt
- Sunday Mba - Warri Wolves (Nigeria) and Nigeria
Mikel has done great and deserve to win. Among the last three, Obi stand out as the most achiever last season.
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