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 chakra and souls of the sons of the Sage of Six Paths, Indra and Asura Ōtsutsuki, were continuously reincarnated into their descendants: the Uchiha and Senju. During the Warring States Period, they were reborn into Madara Uchiha and Hashirama Senju, who continued the brothers' struggle until their own deaths. Prior to Madara's death, Black Zetsu manipulated him into becoming the first reincarnate to successfully merge Indra's and Asura's chakra, resulting in him awakening the Rinnegan.

After Madara's death, Indra and Asura were next reborn into Sasuke Uchiha and Naruto Uzumaki, a descendant of Asura through the Uzumaki clan. As the first reincarnates to have been born into an era of relative peace, the two maintained a rather civil rivalry until Sasuke fell victim to his clan's Curse of Hatred, before eventually being freed from it by Naruto with his Will of Fire.

While reincarnates of the same individual share some similarities — for example, two of Indra's reincarnates, Madara and Sasuke, both awakened the same straight tomoe Mangekyō Sharingan — their chakra signatures are still differentiable enough to not be mistaken for one another by sensor types. For instance, Madara — being a sensor type himself — was able to distinguish between Hashirama's and Naruto's chakra despite both being reincarnates of Asura. Kaguya Ōtsutsuki was able to use her Byakugan to see that Naruto and Sasuke were reincarnates of her grandsons. Depending on the power of Indra's and Asura's reincarnates, it is possible for them to meet with their father's spirit and receive the powers required to seal Kaguya.

The Ōtsutsuki Clan, in particular, employs the Kāma to reincarnate, in which they place it, in the form of a seal, onto a compatible person, who becomes a "vessel". When the seal decompresses all of the biological data of the clan member onto the vessel, it will transform the body into that of the Ōtsutsuki, whose soul will take over, reincarnating in both body and soul completely.

Known Reincarnates
Asura Ōtsutsuki
 * Hashirama Senju
 * Naruto Uzumaki

Indra Ōtsutsuki
 * Madara Uchiha
 * Sasuke Uchiha

Similar Cases

 * Reincarnation Ninjutsu are techniques that usually require or accomplish the transfer of life force between people.
 * Orochimaru developed a method of transferring his soul into another person's body, effectively reincarnating inside them to extend his lifespan.
 * With the Summoning: Impure World Reincarnation technique, a deceased person's soul is forcefully reincarnated into the body of a living person, who serves as a sacrifice.
 * Immediately after his death, Obito Uchiha was able to leave the plane between life and the afterlife and possesses Kakashi Hatake, who temporarily awakened his Mangekyō Sharingan in both eyes.

Trivia

 * The reincarnation cycle does not seem to resume until both of the current reincarnates of Asura and Indra are dead, as Asura did not reincarnate following Hashirama's death until after Madara's second death, which occurred decades later and both reincarnated shortly after Madara's second death.
 * A translation error in the official subtitles for Naruto: Shippūden episode 421 has Hagoromo state that Madara and Hashirama were the first generation of his sons' reincarnates, despite there being numerous other reincarnates before them. This was corrected in episode 468.
 * During their final battle, Naruto and Sasuke developed new forms of their chakra avatars, which were named after their past selves in a Studio Pierrot blog:
 * Sasuke absorbed the chakra of the nine tailed beasts into his Complete Body — Susanoo to develop his "Indra Susanoo".
 * Naruto combined three Kurama avatars into one to develop his "Asura Kurama Mode".
 * Both current reincarnates, Sasuke and Naruto, are members of near-extinct clans and are the only known members of their clans who are still alive to have offspring, at the present time.
 * Upon first meeting him, Obito Uchiha falsely claimed that Nagato was a reincarnation of the Sage of Six Paths.