Trek-Segafredo's Pedersen led the way going into the uphill finish of the 213-kilometres stage that took riders from Vasto to Melfi.

However, Matthews unleashed a sensational sprint for the line to leave the former road race world champion in his wake and finish after 5hour 1min 41sec.

It is the first victory since stage 14 of last year's Tour de France for Matthews and a welcome return to form for the 32-year-old.

The first part of his season has been marred by a positive COVID-19 test and a crash at the Tour of Flanders.

"What I've been through this last few months, to now come back with a victory for the team," said the Team Jayco-AIUIa sprinter.

"They rode all day today and fully committed for me to win the stage.

"It's been such a rollercoaster this year so already on stage three, to have a stage win is more than I could dream of.

"I heard Pedersen had been dropped on the climb so I hoped he would be a little bit pinned for the sprint.

"I knew I needed to go early and get the jump on them and it worked out."

Damp conditions saw the peloton whittled down in southern Italy, with the general classification undergo a shake-up.

Belgium's Remco Evenepoel remained in pole position for the maglia rosa and even managed to extend his lead slightly.

He picked up bonus seconds by winning the intermediate sprint in front of rival Primož Roglič of Slovenia, who is 44 seconds off the pace.

Portugal's João Almeida is closest to the Belgian, clocking in 32 seconds slower than the leading 10hour 18min 7sec total.

"We were just there," Evenepoel said. 

"We wanted to take the downhill in first position because the rain made the roads tricky.

"It didn't cost much energy [to sprint] so if the seconds are there to be grabbed, we should not be afraid to take them.

"It's one more second on Primož and three on the rest so that's good after quite an easy day with a hectic finale."

The race is set to continue tomorrow with an intermediate 210-kilomtre fourth stage from Venosa to Lago Laceno.