Reincarnation

is a process through which the chakra and soul of a deceased individual are reborn in a new living vessel, referred to as a.

Overview
For a millennium after their deaths, the chakras and souls of the sons of the Sage of the Six Paths, Indra and Asura Ōtsutsuki, would continue to be reincarnated into their descendants. During the Warring States Period, they would be reborn into Madara Uchiha and Hashirama Senju, who would continue the brothers' struggle until their own deaths. Prior to Madara's death, Black Zetsu would manipulate him into becoming the first reincarnation to successfully merge Indra's and Asura's chakras, and this would lead to the awakening of the Rinnegan.

After Madara's death, the chakras and souls of Indra and Asura would be reborn into Sasuke Uchiha of the Uchiha clan, and Naruto Uzumaki — a descendant of Asura through the Uzumaki clan, respectively. As the first reincarnations to have been born into an era of relative peace, the two would maintain a rather civil rivalry until Sasuke would fall victim to his clan's Curse of Hatred before being freed from it by Naruto with his Will of Fire.

The reincarnation cycle will not start again until both of the current reincarnations have passed away; the brothers would not reincarnate until Madara's death, which would occur decades after Hashirama's.

Although Hashirama and Naruto are both Asura's reincarnations, Madara, a sensor type, was able to differentiate their chakras, showing that it is different from reincarnation to reincarnation. However, the chakra pathways do not appear to change, or at the very least, contain similarities. Whilst using the Byakugan, Kaguya Ōtsutsuki was able to note that Naruto and Sasuke were the reincarnations of her grandsons. The reincarnations also possess somewhat similar abilities, at least in Indra's case as Madara saw he and Sasuke shared similar abilities, specifically both having the rare Straight Tomoe Sharingan, and correctly speculated they share some connection beyond blood.

Known Reincarnations
Asura Ōtsutsuki
 * Hashirama Senju
 * Naruto Uzumaki

Indra Ōtsutsuki
 * Madara Uchiha
 * Sasuke Uchiha

Similar Cases

 * Through the Summoning: Impure World Reincarnation technique, both "reincarnation" and "resurrection" can be found; the sacrificed body is reincarnated into the body of the summoned shinobi, while the reincarnated shinobi is resurrected from the dead.
 * Reincarnation Ninjutsu are techniques that usually require or accomplish the transfer of life force between people.
 * Obito Uchiha has shown the ability to transmigrate and enter living vessels to bestow them the power of his eyes, witnessed after his death, Obito's spirit returns from the Pure Land and possesses Kakashi Hatake to temporarily awaken the Mangekyō Sharingan in both of his eyes.

Trivia

 * In the official subs for episode 421 of the Naruto: Shippūden, Hagoromo stated that the first generation of his sons' reincarnates was that of Madara and Hashirama; however, in the manga, it was stated there were numerous other reincarnates before them.
 * This was later corrected in episode 468.
 * During their final battle, Naruto and Sasuke developed avatars that were named after their incarnates in Studio Pierrot blog:
 * Sasuke absorbed the chakra of Tailed Beasts into his Susanoo to develop his "Indra Susanoo"
 * Naruto combined three of his tailed beast mode avatars into one to develop his "Asura Kurama Mode".
 * Both current reincarnations, Sasuke and Naruto, are members of near extinct clans and are the only known members of their clan to have offspring, thus restoring their clan.