Ten people were reportedly caught in the sudden snow slide but seven were able to free themselves, police said.
Two men and a woman, however, were still missing.
"If we have not found them by nightfall, it will be critical," a police spokesman said.
The group spent New Year's Eve in a mountaintop cabin and was on a snowshoe expedition Monday when the avalanche struck.
Professional search teams were combing the Reiter Alm range on the Austrian border, which is used by the German military as a training site for mountain infantry.
The German Alps have seen heavy snowfalls in recent days, with fresh snow forecast for Tuesday.
Three skiers and two mountain climbers died in the French Alps at the weekend after French weather forecasters posted a level four avalanche alert, the second highest on a scale up to five.