Mahrez is favourite to win the award after leading Leicester City to a shocking Premier League win in 2016.
CAF cut a long list of nominees to just three ahead of the Glo-CAF Awards night in Abuja where the winner will be announced in January 2017.
Holder Pierre-Emerick Aubameyang makes the list; he won the award in 2015 for his impressive form for Bundesliga side, Borussia Dortmund.
Algeria international Riyad Mahrez also makes the list and is favourite to win the award after leading Leicester City to a shocking Premier League win in the year under review.
He also won the BBC African Player of Year earlier in December.
Mahrez scored 17 goals and had 12 assists to help Leicester City win their first league title in history.
Senegal international and Liverpool forward Sadio Mane has also been shortlisted.
For the African Player of the Year (Based in Africa), the final nominees are Mamelodi Sundowns players Uganda goalkeeper Dennis Onyango, Zimbabwe striker Khama Billiat and midfielder Rainford Kalaba.
African Player of the Year (in alphabetical order)
Pierre-Emerick Aubameyang (Gabon & Borussia Dortmund)
Riyad Mahrez (Algeria & Leicester City)
Sadio Mané (Senegal & Liverpool)
African Player of the Year – Based in Africa
Denis Onyango (Uganda & Mamelodi Sundowns)
Khama Billiat (Zimbabwe & Mamelodi Sundowns)
Rainford Kalaba (Zambia & TP Mazembe)