Luminescence efficiency droop has been studied in AlGaN epitaxial layers and multiple quantum wells (MQWs) with different strength of carrier localization in a wide range of temperatures. It is shown that the dominant mechanism leading to droop, i.e., the efficiency reduction at high carrier densities, is determined by the carrier thermalization conditions and the ratio between carrier thermal energy and localization depth. The droop mechanisms, such as the occupation-enhanced redistribution of nonthermalized carriers, the enhancement of nonradiative recombination due to carrier delocalization, and excitation-enhanced carrier transport to extended defects or stimulated emission, are discussed.