GaN nanowires (NWs) with an AlN insertion were studied by correlated optoelectronic and aberration-corrected scanning transmission electron microscopy (STEM) characterization on the same single NW. Using aberration-corrected annular bright field and high angle annular dark field STEM, we identify the NW growth axis to be the N-polar [000-1] direction. The electrical transport characteristics of the NWs are explained by the polarization-induced asymmetric potential profile and by the presence of an AlN/GaN shell around the GaN base of the wire. The AlN insertion blocks the electron flow through the GaN core, confining the current to the radial GaN outer shell, close to the NW sidewalls, which increases the sensitivity of the photocurrent to the environment and in particular to the presence of oxygen. The desorption of oxygen adatoms in vacuum leads to a reduction of the nonradiative surface trap density, increasing both dark current and photocurrent.