Financial markets were not affected by the attack.
WEARING COATS
"We saw four people in a car, they were wearing coats and that seemed pretty weird in this weather. Then we saw they had guns," Muhammet Nur, 15, told Reuters.
"At first we thought they might be civil police but at that moment they drew their guns and a gun battle began," said Nur, who saw the gunbattle from a nearby cafe.
"I could not get the (car) plate number but my friend did."
Istanbul governor Guler said that the three dead gunmen were Turkish citizens, believed to be aged 25-30. Police were searching for a man suspected of driving the car.
State Department spokesman Tom Casey, speaking in Sofia, said no Americans were injured and the United States did not know who was responsible or whether the consulate was a target.
Mutlu Gunes, a 13-year-old eyewitness, said he was on his way to a mosque when he spotted several men preparing guns and placing them inside a Ford Focus car, before driving a short distance to the modern consulate complex.
"The three of them got out of the car. One of them shot a policeman in the chest and I saw one terrorist killing himself after being shot by police. Then I hid under a car," Gunes told reporters.
Turkey has seen armed attacks from a variety of groups over the years, including Maoists, Trotskyists, Kurdish separatists and Islamist militants.
"I curse strongly these kinds of terror attacks. Turkey will struggle to the end with those who organise these (attacks) and the mentality behind them," President Abdullah Gul said.
The U.S. consulate was moved to a high-security location in 2003 as major consulates and embassies stepped up security following the September 11, 2001, attacks in New York.
The most serious attacks in Turkey were in November, 2003, when 62 people were killed by Islamist militants targeting two synagogues, a bank and the British consulate.
Four people were killed and 15 wounded in an explosion in Istanbul in June 2004, before U.S. President George W. Bush visited the city.
