Maman Sidikou, the head of the AU in Somalia, apologised to the families of the seven people killed in the attack despite previous denial by the Ugandan AU about the authenticity of the incident.
AU troops from Uganda began shooting at men at a wedding party after coming under fire according to the campaign group Human Rights Watch.
Witnesses said that the troops entered several houses in Merca, 70km (45 miles) south of the capital Mogadishu, after a grenade attack on their convoy.
Mr Sidikou admitted on Friday that seven civilians had been killed.
"We have established that, on that occasion, seven civilians died following an incident involving our troops," he said in a statement.
"I would like, on behalf of the African Union, to offer my sincere apology for these deaths. We regret these deaths," he added.
The three AU soldiers have now been indicted and are waiting to be arraigned, according to the statement.
"I have instituted a board of inquiry composed of military, civilian and police officers who are not from the contingent concerned in order to ensure impartiality," Mr Sidikou said.
