Defect recovery, optical activation and diffusion of Er implanted GaN epilayers grown on sapphire were studied after annealing at 1000°C with proximity cap and 1200°C under nitrogen atmosphere at high pressure (1 GPa). The erbium ions with 160 keV were implanted at room temperature to nominal fluences of 5×1014 cm−2 and 5×1015 cm−2. Some samples were co-implanted with oxygen ions to study its influence on the Er behaviour. During implantation a large fraction of Er is incorporated in Ga sites of the GaN lattice for the samples implanted with lower dose. The implantation damage recovers almost completely after rapid thermal annealing (120 s) at 1000°C with proximity cap. The annealing has no influence on the Er profile. The increase of the annealing time leads to the degradation of the surface due to nitrogen loss. The samples implanted with higher fluence and exposed to the same annealing procedure display distinct behaviour depending on the presence of oxygen. In samples without oxygen, the recovery is faster and accompanied by the segregation of Er towards the surface. For samples containing oxygen the damage recovery proceeds slowly and the Er profile remains stable. Annealing at 1200°C in nitrogen atmosphere at a pressure of 1 GPa promotes the complete recovery of the damage in the sample without oxygen. During this annealing, a fraction of Er diffuses into the bulk. After annealing the optical spectra reveal the presence of several sharp lines the intensity of which increases significantly with the annihilation of the implantation damage.