There are eight different castles available in Heroes III: three "good" towns (Castle, Tower, and Rampart), three "evil" (Inferno, Necropolis, and Dungeon), and two "neutral" (Fortress and Stronghold). Another neutral town, the Conflux was added in the Armageddon's Blade expansion pack. Each town has seven basic creatures, each of which can be upgraded to a more powerful variant. Each town also features two associated hero types: one that leans more toward might (combat), and one that leans more toward magic. Some towns have a predisposition toward might or magic, and the leanings of the hero classes may simply be a matter of degrees.

• The Castle army is made up predominantly of humans, represented as traditional medieval troops, supplemented by the addition of mythological griffins and divine angels. The might hero is the Knight and the magic hero is the Cleric. The kingdom of Erathia is of the castle alignment.
  
• The Rampart army is composed mainly of sylvan creatures (like elves, dwarves, unicorns and dendroids) from Germanic and Greco-Roman mythology. Accordingly, their home is in the grasslands and forests. The Rampart town is also host to "good" dragons. The might hero is the Ranger and the magic hero is the Druid. The kingdom of AvLee is of the rampart alignment.
  
• The Tower is associated with arcane elements of fantasy, and armies are composed of wizards, magical beings, and animated constructs. Towers are at home in Arctic environments. The might hero is the Alchemist and the magic hero is the Wizard. The desert kingdom of Bracada is of the tower alignment.
  
• The Inferno is a hell-like castle built on smoldering ground. Its armies consist of demonic creatures, such as devils and demons. The might hero is the Demoniac and the magic hero is the Heretic. The Kreegans of Eeofol are of the inferno alignment.
  
• The Necropolis is a ghost town of the undead. The might hero is the Death Knight and the magic hero is the Necromancer. The kingdom of Deyja is of the necropolis alignment.
  
• The'Dungeon houses monsters that live in underground caverns, including the "evil" dragons. The might hero is the Overlord and the magic hero is the Warlock. The kingdom of Nighon is of the dungeon alignment.
  
• The Stronghold is populated with brutish, tribal creatures associated with barbarism. Goblinoids (like orcs) and organic giants make up the bulk of the army. Stronghold units are at home in the deserts and wastes. The might hero is the Barbarian and the magic hero is the Battle Mage. The kingdom of Krewlod is of the stronghold alignment.
  
• The Fortress is built in marshland and is home to gnolls and numerous reptilian creatures. The might hero is the Beastmaster and the magic hero is the Witch. The kingdom of Tatalia is of the fortress alignment.
  
• The Conflux creatures and heroes are mainly elementals. The might hero is the Planeswalker and the magic hero is the Elementalist. The heroes and buildings focus on magic specialties, as well as most creatures having innate magic resistances and immunities. The Conflux has no specified alignment.
  

There are also many "neutral" creatures, not associated with any town type, which can be recruited from special buildings on the game map.