We present a semiempirical pseudopotential method based on screened atomic pseudopotentials and derived from ab initio calculations. This approach is motivated by the demand for pseudopotentials able to address nanostructures, where ab initio methods are both too costly and insufficiently accurate at the level of the local density approximation, while mesoscopic effective-mass approaches are inapplicable due to the small size of the structures along, at least, one dimension. In this work, we improve the traditional pseudopotential method by a two-step process: First, we invert a set of self-consistently determined screened ab initio potentials in wurtzite GaN for a range of unit-cell volumes, thus determining spherically symmetric and structurally averaged atomic potentials. Second, we adjust the potentials to reproduce observed excitation energies. We find that the adjustment represents a reasonably small perturbation over the potential, so that the ensuing potential still reproduces the original wave functions, while the excitation energies are significantly improved. We furthermore deal with the passivation of the dangling bonds of free surfaces which is relevant for the study of nanowires and colloidal nanoparticles. We present a methodology to derive passivant pseudopotentials from ab initio calculations. We apply our pseudopotential approach to the exploration of the confinement effects on the electronic structure of GaN nanowires.