The three students appear to be female.
Dunlap wrote that during the 2014-15 school year, "a project was assigned in an Upper Darby High School history class with the intention of illustrating the historical impact of the 1920s."
"There were skits associated with this project, and a photo of a skit intended to identify and highlight the atrocities of the Ku Klux Klan circulated on social media [Thursday] evening," Dunlap wrote.
He added: "The photo has offended many in the community, and the Upper Darby School District is deeply sorry for this. Though there was no intention to harm or offend anyone, we recognize that the project was in poor judgment and an inappropriate activity."
NBC10 reported that the photo first surfaced on Twitter in August.
Dunlap noted that the Upper Darby School District staff, board and administration in Delaware County have been undergoing diversity training and said a plan to address diversity will also be implemented for students as well.
"The Upper Darby School District truly regrets this incident and appreciates the support and cooperation of our community as we attempt to use this as a teachable moment regarding cultural, historical, and racial understanding," he wrote.
Staff writer Rob Tornoe contributed to this article.