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Abstract Eu-doped Gallium nitride (GaN) is a promising candidate for GaN-based red light-emitting diodes, which are needed for future micro-display technologies. Introducing a superlattice structure comprised of alternating undoped and Eu-doped GaN layers has been observed to lead to an order-of-magnitude increase in output power; however, the underlying mechanism remains unknown. Here, we explore the optical and electrical properties of these superlattice structures utilizing terahertz emission spectroscopy. We find that ~0.1% Eu doping reduces the bandgap of GaN by ~40 meV and increases the index of refraction by ~20%, which would result in potential barriers and carrier confinement within a superlattice structure. To confirm the presence of these potential barriers, we explored the temperature dependence of the terahertz emission, which was used to estimate the barrier potentials. The result revealed that even a dilutely doped superlattice structure induces significant confinement for carriers, enhancing carrier recombination within the Eu-doped regions. Such an enhancement would improve the external quantum efficiency in the Eu-doped devices. We argue that the benefits of the superlattice structure are not limited to Eu-doped GaN, which provides a roadmap for enhanced optoelectronic functionalities in all rare-earth-doped semiconductor systems.