Kakashi's Sharingan is not his own. In fact, the Sharingan is a bloodline technique that can only be used by the members of the Uchiha clan. In one of his earliest missions as a jōnin, his friend Obito Uchiha sacrificed his life to save Kakashi from being crushed to death. In his seemingly-last moments, he instructed their mutual companion Rin to transplant his one remaining Sharingan to replace an eye that Kakashi lost. After accidentally killing Rin, he obtained the Mangekyō Sharingan.

The Sharingan allows its user to copy the movements of his opponents, while the upgraded Mangekyō grants him access to use the special jutsu, Kamui. He learned to master it over the years, though he is unable to turn it off in the same way an Uchiha can and covers it up to keep it from draining his chakra. Though it takes a larger toll on his stamina than it might on a full-blooded Uchiha, he can access many of the same abilities and jutsu that an Uchiha can.

During the birth of the Ten-Tails' Jinchūriki and the battle against a revived Madara Uchiha, Kakashi is reunited with Obito who was revealed to be the secret leader of Akatsuki. While Obito eventually joins Naruto and reconciles with Kakashi, they still have Madara to deal with. As part of his plans, Madara begins stealing Sharingans and Rinnegans in order to enhance his abilities. One of them is Kakashi's.

Madara plucks it out from his head in order to pursue an escaping Obito. While he loses his Sharingan techniques, Naruto uses the power of his Six Paths chakra to restore his normal eye.