Witnesses said that as many as 30 police vehicles descended on Leighton Arches in Welshpool just after 6am on Monday.
A police spokesman said 80 officers were present at the site, that the operation had been ‘planned’, and there was ‘no risk to the public’.
Both uniformed and plain-clothed officers were involved in the raid.
Scores of cars could be seen lining the road outside the site, with a large number of police vans also present.
A spokesman for the force said it had "executed search warrants at the Leighton Arches caravan park" and "made a number of arrests connected to the suspected trafficking of Class A controlled drugs".
Superintendent Clark Jones-John said: “At this time, three men – aged 25, 19 and 32 – have been arrested on suspicion of trafficking Class A controlled drugs, and are in police custody.
“During the course of a significant police operation, we have seized a quantity of what is believed to be Class A and Class B drugs.
“Neighbourhood policing officers will be in the Welshpool area to provide reassurance to residents at the Leighton Arches caravan park and the wider community.
“This investigation is part of Dyfed-Powys Police’s commitment to reduce the threat and serious harm Class A drugs pose to individuals and our communities as a whole.”
People with concerns about criminal activity involving drugs are encouraged to contact Dyfed-Powys Police either online at bit.ly/DPPContactOnline, by emailing firstname.lastname@example.org, or by calling 101. People who are deaf, hard of hearing, or speech impaired can text the non-emergency number on 07811 311 908.
Alternatively, people can contact the independent charity Crimestoppers anonymously by calling 0800 555111, or visit crimestoppers-uk.org.