Highly pathogenic avian influenza (HPAI) virus subtype H7N3 has been circulating in poultry in Mexico since 2012 and vaccination has been used to control the disease. In this study, eight Mexican H7N3 HPAI viruses from 2015-2017 were isolated and fully sequenced. No evidence of reassortment was detected with other avian influenza (AI) viruses, but phylogenetic analyses show divergence of all eight gene segments into three genetic clusters by 2015, with 94.94 to 98.78 percent nucleotide homology of the HA genes when compared to the index virus from 2012. The HA protein of viruses from each cluster showed a different number of basic amino acids (n = 5-7) in the cleavage site, and six different patterns at the predicted N-glycosylation sites. Comparison of the sequences of the Mexican lineage H7N3 HPAI viruses and American ancestral wild bird AI viruses to characterize the virus evolutionary dynamics showed that the nucleotide substitution rates in PB2, PB1, PA, HA, NP, and NS genes greatly increased once the virus was introduced into poultry. The global nonsynonymous and synonymous ratios imply strong purifying selection driving the evolution of the virus. Forty-nine positively selected sites out of 171 nonsynonymous mutations were identified in the Mexican H7N3 HPAI viruses, including 7 amino acid changes observed in higher proportion in North American poultry origin AI viruses isolates than in wild bird-origin viruses. Continuous monitoring and molecular characterization of the H7N3 HPAI virus is important for better understanding of the virus evolutionary dynamics and further improving control measures including vaccination.