The Assassin of the Mist!

is episode 7 of the original Naruto anime.

Synopsis
Team 7 is journeying upon a small motor boat owned by a commoner, Kaji, towards the Land of Waves. Thick layers of mist swirl around the boat. Naruto makes a rather loud statement, to which Kaji silences him. "Why do think we're rowing instead of using the engine and moving under cover of the mist? It's so we don't attract attention," he rebukes. Naruto recognizes his mistake and covers his mouth.

Kakashi asks Tazuna why he told Konoha that this was only a C-Ranked mission, while it would obviously fall in the B-Ranked or A-Ranked category. Not only that, Kakashi threatens that to abandon the mission if Tazuna does not provide an adequate explanation. Tazuna replies that even the nobles of Land of Waves are impoverished. He would not be able to afford a B-Ranked or A-Ranked mission. Additionally, he tells them that an extremely wealthy businessman called Gato is responsible for his country's struggles. Gato monopolized the Land of Waves's trade, thus earning a massive profit at the expense of the residents of the island. Tazuna then convinces them into continuing the mission with a hefty guilt trip involving his family's grief if Tazuna died. Minutes later, they disembark at a small port upon arriving in Land of Waves and continue on foot.

As they travel down a small dirt road, Naruto, bent on surpassing Sasuke, hurls a kunai knife at a bush, startling and alarming his comrades. It turns out to be "nothing, just a mouse". Sakura reprimands him for it, but Naruto pitches another kunai at another bush in the opposite direction. An annoyed Sakura hits him on the head this time, calling his act "so obvious it's pathetic!" Naruto swears he sensed something in there, which turns out to be an extremely terrified snow rabbit. Naruto apologizes and sympathizes profusely with the rabbit, picking it up and hugging it to an extreme. While the others passed it off as Naruto's usual idiocy, Kakashi notices that strangely enough, the rabbit's fur is white. Snow rabbits only have white fur during winter, indicating that this rabbit was raised indoors. This rabbit belonged to someone nearby and most likely was used for a Replacement Jutsu.

Kakashi suddenly tells everyone to duck as a giant Zanbatō spins pass them, nearly killing them all. The Zanbatō crashes into a tree and a rather tall ninja with a bandage mask covering his nose and mouth leaps onto the handle of the sword. The ninja reveals himself to be Zabuza Momochi, a missing-nin from Kirigakure, the Village Hidden in the Mist. Zabuza demands to have Tazuna, to which Kakashi refuses. A confrontation is inevitable.

Kakashi recognizes him as the Demon of the Hidden Mist and states that he'll have to use "this" to defeat him. He pulls up his forehead protector to reveal a red eye with three tomoe, which is revealed to be the Sharingan. Zabuza hints that he knows of the Sharingan, and says that he is honored to see it in action.

Naruto wonders what this "Sharingan" is. Sasuke immediately recognizes it and explains that the Sharingan is a Dojutsu that can immediately see and anticipate all ninjutsu, genjutsu, and taijutsu at hand. Naruto, Sakura, and Tazuna are rendered speechless at this news.

Sasuke is puzzled, however. The Sharingan is a rare kekkei genkai exclusive to the Uchiha clan, which is Sasuke's clan; however, Kakashi is not an Uchiha, yet he possesses the Sharingan. Sasuke wonders if Kakashi is in fact part of his clan.

Zabuza tells Sasuke that his statements on the Sharingan's capabilities had only "scratched the surface". He continues with the explanation that the Sharingan can also copy any of these three types of techniques by simple observation of it, thus enabling the user to instantly and flawlessly perform it and reflect it back onto his or her opponent.

Zabuza states that he is after Tazuna, and informs Kakashi that he has been included in his Bingo Book as a highly dangerous ninja that has earned the nickname "Copy Ninja Kakashi" for copying over 1000 ninjutsu, and would consider it a testament to his own skill if he killed him too.

He then ends the conversation with Hidden Mist Technique, which summons a thick veil of Mist from the nearby lake in order to hide himself from the Sharingan. Kakashi orders Team 7 to assume the Manji Formation.

Sasuke almost collapses from the atmosphere of two Jōnin about to clash, stating in his mind that it's "enough to make someone choke". He refuses this feeling, stating further that he'd rather die than take this. Kakashi notices his nervousness and tells him to calm down. "I will not allow my comrades to die! Trust me." Zabuza says it's useless and instantly appears in the center of the formation, freezing everyone in fear. Zabuza states that it's over and prepares to strike everyone with his Zanbatō. Kakashi races toward them and stabs Zabuza in the stomach with his Kunai just before his stroke could fall. Water starts to pour out of Zabuza's body. It collapses into a puddle of water of as the real Zabuza appears behind Kakashi, revealing that he had used Water Clone Technique. He proceeds to slice Kakashi in half at the waist. However, Kakashi's body dissolves into water, surprising Zabuza as he realizes that Kakashi must have copied Water Clone as he charged toward him. Kakashi appears behind Zabuza, catching him off guard, and holds a knife to Zabuza's throat.

Trivia

 * In Episode 17, in a flashback, a young Haku is shown chasing after a white rabbit which Zabuza then picks up, hands it to him, and then pats Haku on the head.