High-density dislocations in materials and poor electrical conductivity of p-type AlGaN layers constrain the performance of the ultraviolet light emitting diodes and lasers at shorter wavelengths. To address those technical challenges, we design, grow, and fabricate a novel nanowire structure adopting a graded-index separate confinement heterostructure (GRINSCH) in which the active region is sandwiched between two compositionally graded AlGaN layers, namely, a GRINSCH diode. Calculated electronic band diagram and carrier concentrations show an automatic formation of a p–n junction with electron and hole concentrations of ∼1018 /cm3 in the graded AlGaN layers without intentional doping. The transmission electron microscopy experiment confirms the composition variation in the axial direction of the graded AlGaN nanowires. Significantly lower turn-on voltage of 6.5 V (reduced by 2.5 V) and smaller series resistance of 16.7 Ω (reduced by nearly four times) are achieved in the GRINSCH diode, compared with the conventional p-i-n diode. Such an improvement in the electrical performance is mainly attributed to the effectiveness of polarization-induced n- and p-doping in the compositionally graded AlGaN layers. In consequence, the carrier transport and injection efficiency of the GRINSCH diode are greatly enhanced, which leads to a lower turn-on voltage, smaller series resistance, higher output power, and enhanced device efficiency. The calculated carrier distributions (both electrons and holes) across the active region show better carrier confinement in the GRINSCH diode. Thus, together with the large optical confinement, the GRINSCH diode could offer an unconventional path for the development of solid-state ultraviolet optoelectronic devices, mainly laser diodes of the future.