Indium incorporation into wurtzite (0001)-oriented InxAlyGa1-x-yN layers grown by plasma-assisted molecular beam epitaxy was studied as a function of the growth temperature (565–635 °C) and the AlN mole fraction (0.01≪y≪0.27). The layer stoichiometry was determined by Rutherford backscattering spectrometry (RBS). RBS shows that indium incorporation decreased continuously with increasing growth temperature due to thermally enhanced dissociation of In–N bonds and for increasing AlN mole fractions. High resolution x-ray diffraction and transmission electron microscopy (TEM) measurements did not show evidence of phase separation. The mosaicity of the quaternary layers was found to be mainly determined by the growth temperature and independent on alloy composition within the range studied. However, depending on the AlN mole fraction, nanometer-sized composition fluctuations were detected by TEM. Photoluminescence spectra showed a single broad emission at room temperature, with energy and bandwidth S- and W-shaped temperature dependences typical of exciton localization by alloy inhomogeneities. Cathodoluminescence measurements demonstrated that the alloy inhomogeneities, responsible of exciton localization, occur on a lateral length scale below 150 nm, which is corroborated by TEM.