Gardai said the crash happened at about 12.30am on the N2 a few minutes north of Ardee as a group travelled home to Donegal from Dublin Airport.
The women were named locally as Mairead Mundy and Rachael Cassidy Battles, both aged in their late 30s, and friends and neighbours who lived beside each other in the village of Bruckless, south Donegal.
The third victim was Ms Mundy's mother, 69-year-old Margaret McGonigle.
A six-year-old girl, one of Ms Battles' four children, was seriously injured in the crash and taken to Temple Street Children's Hospital in Dublin.
Thomas Pringle, Independent TD in Donegal, knew those caught up in the tragedy.
"It's impossible to know what to say," he said.
"The local community, everybody, is just devastated and in shock. It's going to be very hard to come to terms with it.
"Two families coming home from a family holiday, it's just tragic circumstances."
Fr James Sweeney, of St Joseph and Connell Church in Bruckless, celebrated a wedding after the news of the tragedy unfolded.
"There's just an absolute sense of shock and devastation," he said.
"The fact that a mother and daughter and a friend, all three in one accident, it's almost overwhelming."
Fr Sweeney added: "It was particularly a sad day for everyone concerned - the beginning of life for one couple and the ending for others."
Three cars were involved in the crash near Aclint Bridge on a relatively wide stretch of road on the Monaghan-Louth border where the speed limit is 100kph.
The cause of the accident is not known but it is understood initial investigations are examining whether the driver of one of the cars swerved to avoid another, which a third car collided with.
Two of the cars were carrying the group of family and friends as they returned to Donegal from holiday.
One of the women who was killed was driving.
It is understood that the husbands of the two younger women were also in the vehicles with a number of children.
One of the husbands remained seriously ill in Our Lady of Lourdes Hospital in Drogheda and other children were taken to hospital for precautionary checks.
Superintendent Feargus Treanor was at the scene within about half an hour of the crash.
"The road was wet but the conditions were fairly okay. It did deteriorate later," he said.
"It was a tough scene."
The cars involved are believed to have been a Vauxhall, a Toyota and a Volkswagen.
Specialist Garda forensic collision investigators spent hours at the scene.
The road was closed for the day with diversions in place, and motorists driving on or off the M1 were being asked to travel to junction 17 for the exit for Castleblayney.
Gardai have appealed for witnesses.
Colm Carthy, Sinn Fein councillor on Monaghan County Council, said politicians were given a presentation in May on the potential to upgrade the N2 from Ardee to Castleblayney to a dual carriageway.
"Transport Infrastructure Ireland said it will be upgraded but not until the level of traffic increases," he said.