The optical properties of InxAlyGa1−x−yN quaternary alloys were investigated by photoconductivity (PC), persistent photoconductivity (PPC), photoluminescence (PL), and photoluminescence excitation (PLE) measurements. Quite interestingly, persistent photoconductivity was observed. Through the combination of our optical studies, we show that the PPC effect arises from composition fluctuations in InxAlyGa1−x−yN quaternary alloys. From the analysis of the decay kinetics, the localization depth caused by composition fluctuations was determined. A comparison between the PL, PLE, and PC measurements gives a direct access to the Stokes’ shift. The Stokes’ shift can be explained in terms of localization due to the existence of nanoscale clusters, and it is consistent with the PPC result. The results shown here provide concrete evidence to support our previously proposed model that the existence of InGaN-like clusters is responsible for the strong luminescence in InxAlyGa1−x−yN quaternary alloys.