Note: This does not unlock the secret alternate costumes (like Swimsuit Sakura or Casual Hinata). Those require specific mission completions.
Have a favorite character I missed? Let me know in the comments! naruto ultimate ninja 5 unlock all characters
Once unlocked, head to VS Mode, pick Sage Mode Naruto vs. Pain on the "Destroyed Leaf Village" stage, and turn the music up. That fight alone is worth the unlock effort. Note: This does not unlock the secret alternate