In this paper, a novel gallium nitride (GaN)-based heterostructure Gunn diode is proposed for the first time to enhance the output characteristics of Gunn oscillation waveforms. A well-designed grooved anode contact is adopted to separate the long-channel diode into two short-channel diodes in parallel. If the grooved anode contact is positioned in the middle of the device, the output power nearly doubles in the grooved-anode diode compared with the single-channel ones, as does the output frequency. Based on the numerical results, the best output characteristics are obtained at the 2.0-µm symmetrical grooved-anode diode, which produces nearly 5.48 mW of power at the fundamental frequency of 172.81 GHz, with 3.13% efficiency of power conversion. If the grooved anode contact is not positioned in the middle of the diode, the harmonic frequency would be enhanced. The GaN heterostructure grooved-anode Gunn diode has been demonstrated to be an excellent solid-state source of terahertz oscillator.