In the beginning, Naruto is a noisy, arrogant, troublesome child, who performs disrespectful pranks around his village. He thinks he is going to be the greatest ninja ever, yet when he is tested, cannot perform even the simplest of techniques which all the other students have mastered. Alone, without any parents to look after him, he is identified with by his teacher, Iruka-sensei, who has also been alone since he was a child. It is known to everyone in the village, but not to Naruto, that he has a monster nine-tailed fox sealed inside of him. Twelve years earlier, the demon fox had attacked the village, destroying it, and killing Iruka's parents. But the village recovered, and the demon fox was neutralized by sealing it inside the newly-born child, Uzumaki Naruto. It was forbidden for anyone in the village to ever reveal the truth to others, especially to the child himself.
Alone, unrecognized and despised by everybody, Naruto performs his pranks to try to gain attention. In the end, when another final exam comes by, all the students are given the chance to demonstrate their developing ninja powers. Everyone passes, except Naruto, who attempts to create a replication of himself, but only succeeds in creating an absurd, weak, useless replication. Iruka, his teacher, has no choice but to fail him. Naruto is depressed, seeing everyone else graduate and acquire the symbol of graduation, a metal plate with the village symbol that they wear as a forehead protector.
Fate and an evil force conspire to give Naruto a second chance. A sly and untrustworthy teacher, Mizuki-sensei, befriends Naruto and convinces him that he can graduate if he steals the Scroll of Sealing and uses its immense and dangerous powers to learn impressive techniques that will allow him to pass. Secretly, Mizuki manipulates Naruto for his own ambition to steal the scroll. He is prepared to kill Naruto in the process.
Naruto steals the scroll and learns one primary and powerful technique. The head of the village, the Hokage-sama is angry by the theft, and sends the village ninjas out to find the childish thief. They are angry, saying that this was no mere prank, but a very dangerous act. Even Hokage-sama realizes that Naruto can cause great damage, and may even be able to unwittingly unseal the demon fox within him.
When Iruka has found Naruto, the boy is confused and exhausted. He has practised over and over one of the forbidden techniques. The teacher and student are set upon by Mizuki. The traitorous sensei injures and disables Iruka, ready to take the next step and steal the scroll and kill both witnesses. Iruka protects Naruto, who runs away, scampering off on all fours just like a fox. Mizuki pursues and catches up, but Iruka appears and is able to protect his student once more. When Naruto finds out the truth about the demon fox sealed inside of him, he realizes that Iruka is a loyal teacher and friend, who has only ever tried to help him. Mizuki attacks, but Naruto, still just a boy, unleashes his newly-developed technique of multiple shadow replication. The astonished Mizuki is beaten up by the hundreds of Naruto duplicates. Iruka is impressed, deciding then to graduate the boy. He gives Naruto his metal forehead protector as a symbol, and the boy is pleased and proud. But the wise Iruka-sensei warns the boy that the path of the ninja is just beginning and it will be a lot harder from here-on. Episode one ends on a note that is upbeat and with the anticipation of many adventures and lessons to come.