Does it look bad to have more letters of recommendation from undergrad than masters professors in PhD admissions? I did my undergrad at university A, and my masters at university B. I am now applying to university C which requires 3 letters of recommendation. Naturally, my thesis advisor is one of them. I also contacted my undergrad advisor whom I did a 4th year project with. 

Finding the right third referee is the problem. In my masters, I only took one course with each professor; 8 different courses with 8 different professor. So I don't think that they know my that well, although I did score A in all of the courses. I decided to contact another undergrad professor whom I took 2-3 courses with.

How will the admission committee look to an application where there are 2 referees from my undergrad and only one from grad study ? Will that affect my application in a negative way ?
"All other things being equal," you'd rather have more references from graduate than undergraduate professors.

Your situation is such that "all other things aren't equal." Apparently, you didn't get to know any of your masters professors well, and only took one course from each. Whereas you had undergraduate professors that you took two to three courses from, and they know you better, and may be in a better position to assess your research potential.

Taking the inference a step further, you may have done your most interesting/significant research as an undergraduate, while your master's work "topped up" your academic knowledge. If that's the case, you probably ought to "go with what you've got," and get more referrals from the (undergraduate) professors that you did more work for, or at least got to know better.

I would rather have "glowing" recommendations from undergraduate professors than "lukewarm" recommendations from graduate professors.

If all else fails, try to take a second course with one of your graduate professors so the s/he can get to know you better, and give you a recommendation.