Tsunade is the granddaughter of Hashirama Senju and Mito Uzumaki. Because Hashirama was the First Hokage of Konohagakure, Tsunade is called "Princess" (姫, Hime). Hashirama doted on Tsunade when she was very young because she was his first grandchild, and found her deviance and her adoption of his own gambling habits highly amusing. Tsunade inherited his necklace when he died. After she graduated from Konoha's Academy, Tsunade was teamed with Orochimaru and Jiraiya under the leadership of Hiruzen Sarutobi. When Jiraiya failed to acquire a bell during the team's first bell test, Tsunade teased him, prompting him to criticise her flat chest. Despite this remark, Jiraiya had a certain interest in Tsunade from their first meeting ,which only increased after her breasts developed; when she nearly killed him for spying on her while she bathed, he was forced to be more discrete about his interests.

Tsunade gives Hashirama's necklace to Dan.

Tsunade's younger brother, Nawaki dreamed of someday becoming Hokage so that he could protect Konoha, their grandfather's legacy. On Nawaki's twelfth birthday, Tsunade kissed his forehead and gave him Hashirama's necklace in the hopes that it would help him achieve his dream. He died the next day, a casualty of the ongoing Second Shinobi World War, thus returning the necklace to her. Tsunade began advocating for the inclusion of medical-nin on all four-man squads in order to avoid future deaths like Nawaki's. Hiruzen, the Third Hokage, agreed with her arguments, but could not dedicate resources to the necessary implementation due to the ongoing war. Dan Katō, on the other hand, shared her views, and as their relationship developed he confided with her his dreams of becoming Hokage so that he could bring change to Konoha and protect his loved one from death. Tsunade kissed his forehead and gave him Hashirama's necklace in the hopes that it would help him achieve his dream.

Hanzō dubs the Sannin.

Although their team under Hiruzen's leadership had disbanded, Tsunade, Orochimaru, and Jiraiya continued fighting together during the Second Shinobi World War. During one such fight in Amegakure, they were the only three to survive an encounter with Hanzō, for which accomplishment Hanzō dubbed them Konoha's "Legendary Sannin". In the aftermath of the battle, Jiraiya opted not to return to Konoha so that he could train the Ame orphans. Tsunade would go on to make her own independent contributions to the war, frequently counteracting Chiyo of Sunagakure's poisons. Although Tsunade's actions are said to have won the war for Konoha, Tsunade was unable to prevent Dan's death, and her failure to stop his severe blood loss caused her to develop haemophobia.

With Dan's death, Hashirama's necklace returned to Tsunade once again, convincing some that the necklace was cursed to kill anyone who wore it other than Tsunade. Tsunade herself became convinced that achieving one's dreams was impossible and that to be Hokage was a fool's job. She therefore left Konoha, taking Dan's niece, Shizune, with her to train her as an apprentice. Due to her haemophobia, Tsunade retired from any direct involvement in medicine or combat, instead relying on Shizune whenever a need for either came up.