We calculate the optical properties of nitride-based quantum dots by taking into account quantum confinement as well as electron–hole interaction. We analyze model structures simulating In_xGa_{1−x}N dots in In_yGa_{1−y}N layers with different alloy compositions. We discuss the trends with the dot size and show that quantum confined excitations exist for a broad range of sizes down to the smallest observed dots. Our results allow us to identify the strong role of Coulomb correlations in the optical spectra and to predict a strong influence of photoexcitation power on selection rules in polarized samples. The signature of quantum confinement can be utilized for a critical interpretation of measured optical spectra.