Alloying ZnO with isovalent compounds allows tailoring the material’s optoelectronic properties. In this work, we theoretically analyze the ZnO-based alloys ZnO–X ≡ (ZnO)1−x
where X = GaN and InN, employing a first-principles Green’s function method GW0 based on the density functional approach. Since the alloy compounds are isovalent to ZnO, we find relatively small distortion of the crystalline structure, however, nanocluster structures are expected to be present in the alloy. ZnO–X reveal intriguing optoelectronic properties. Incorporating GaN or InN in ZnO strongly narrows the energy gap. The band gap energy is reduced from E
= 3.34 eV in intrinsic ZnO to ∼2.17 and ∼1.89 eV in ZnO–X by alloying ZnO with 25% GaN and InN, respectively. Moreover, clustering enhances the impact on the electronic structure, and the gap energy in ZnO–InN is further reduced to 0.7–1.5 eV if the 25% compound contains nanoclusters. The dielectric function ε
2(ω) varies weakly in ZnO–GaN with respect to alloy composition, while it varies rather strongly in ZnO–InN. Hence, by properly growing and designing ZnO–X, the alloy can be optimized for a variety of novel integrated optoelectronic nano-systems.