Nature Transformation

is an advanced technique for manipulating chakra. While Shape Transformation changes the shape and movement of chakra, nature transformation changes the actual nature of the chakra, altering its properties and characteristics. It is notable that few shinobi can use both shape manipulation and nature manipulation.

As explained in chapters 314 and 321 in the manga, Nature Manipulation/Transformation is one of two necessary techniques for creating a jutsu, it's counterpart being Shape Transformation. Nature Manipulation entails the molding and defining of ones chakra into a innate type of chakra nature.

Basic Types
There are five basic types in which the nature of chakra can be transformed, called the :

These five types are also called elements and are not only the origin of the names of the Five Great Shinobi Countries, but also the foundation of all elemental ninjutsu.

These elements allow for elemental ninjutsu to be performed:
 * Fire natured chakra allows for ninjutsu.
 * Wind natured chakra allows for ninjutsu.
 * Lightning natured chakra for ninjutsu.
 * Earth natured chakra for ninjutsu.
 * Water natured chakra for ninjutsu.

The five basic natures are all connected to each other in a circle, each being weaker than one and stronger than another:
 * Fire is strong against Wind, but weak against Water.
 * Wind is strong against Lightning, but weak against Fire.
 * Lightning is strong against Earth, but weak against Wind.
 * Earth is strong against Water, but weak against Lightning.
 * Water is strong against Fire, but weak against Earth.

Basically this means that if an elemental jutsu is put against an elemental jutsu of the same level, but of a stronger nature, then the stronger natured jutsu will prevail. However, a weaker natured jutsu can overpower a stronger natured jutsu if the weaker natured jutsu is of a higher level.

In general, every person has a chakra that has an affinity towards one of these types, a characteristic that seems to be genetic, since whole clans sometimes share the same affinity. Most members of the Uchiha clan, for example, had an affinity towards the Fire nature. To find out what affinity someone has, special pieces of paper from a special type of tree are used that react to even the slightest hint of chakra in any of a number of ways, depending on the nature latent in the chakra.

This affinity makes it easier to learn how to create and control the nature in question, although even with an affinity this progress will usually take any number of years. Shinobi are not limited to the nature they have an affinity to, though. By the time they reach the rank of Jonin, most shinobi have mastered two natures. However, because of the difficulty of mastering a nature and the time required to learn it, it is almost impossible to master all five natures.

Advanced Types
Besides the five basic nature types, there are several more advanced types. By using two basic types simultaneously, one can create a completely new nature with unique properties, and is referred to as a "elementally-recomposed nature type". Doing this requires a special ability and is considered a kekkei genkai as such abilities are rarely seen outside a kekkei genkai.

So far, three natures have been shown:
 * The nature used by Haku is created by simultaneously using the Water and Wind natures (Wind cooling down Water until it freezes). This nature allows for the use of  ninjutsu. Ice Release has been shown as being strong against Fire Release. Yukigakure-nin and Renga were also able to use Ice Release techniques without the kekkei genkai, by drawing on already-existing ice and cold.
 * The nature used by the First Hokage and Tenzo is created by simultaneously using the Earth and Water natures (Water in the Earth causes plants, like wood, to grow). This nature allows for the use of  ninjutsu.
 * The nature used by the Four-Tailed Beast is created by simultaneously using the Fire and Earth natures (Fire melting Earth into Lava). This nature allows for the use of  ninjutsu.

Speculation

 * The Third Kazekage had a special magnetic chakra unique to him, allowing him to use his signature Iron Sand techniques. While no official sources have called it a chakra nature, some fans speculate it may be a combination of Earth and Lightning natures.
 * Gaara and Shukaku's sand manipulation is also thought by some fans to be an elemental fusion. While unconfirmed, it can be noted that Gaara is normally Earth natured, but when in Shukaku form he is able to use Wind natured chakra leading to the speculation that Sand manipulation is an elemental fusion of Earth and Wind natured chakra.
 * Guren has a unique ability allowing her to use ninjutsu. Although not confirmed, this is likely also an advanced element. When he first encountered it, Orochimaru commented that he had never seen an 'elementally-recomposed nature type' like it before.
 * The steam used by Han, The jinchūriki of the Five-Tailed Beast might be an advanced nature. There is no mention of a "Steam Release," or "Steam nature," though.
 * The bubble-style ninjutsu used by Utakata, the jinchūriki of the Six-Tailed Slug might be an advanced nature. There is no mention of a "Bubble Release," or "Bubble nature," though.

Yin and Yang
Aside from the five basic types of nature transformation, there is also a sixth type: the transformation of the and  nature of chakra. Not much is known about this so far, but Yamato implies that it is the source of certain non-elemental jutsu such as Shadow Imitation Technique, Multi-Size Technique, medical ninjutsu, and genjutsu. It is unknown whether this type of nature transformation is similar to the elemental nature manipulations or whether it is a completely different kind of nature transformation.

When the Fourth Hokage sealed the Nine-Tailed Demon Fox within his son, Naruto Uzumaki, he split the demon fox's chakra into a Yin and a Yang part, sealing only the Yang part within Naruto. This suggests that the Yin-Yang nature is inherent to chakra and is merely altered, while chakra has to actually be transformed to gain an elemental nature.

Combining with Shape Transformation
While Nature Transformation changes the shape and movement of chakra, Shape Transformation allows a ninja to change the actual shape and actions of the chakra, altering its abilities. Because of this, a technique like Rasengan can be turned into Wind Release: Rasengan or Wind Release: Rasenshuriken, because of Wind Release being joined with the movement of chakra. The cutting nature of wind-natured chakra into millions of minuscule blades, in a spiraling formation, turns as seen when used against Kakuzu.