Because his mother died when he was very young, Kakashi was raised during his early years by his father, Sakumo Hatake. Sakumo was famed throughout the shinobiworld, having saved Konoha on at least one occasion; Kakashi in particular revered his father. During one of Sakumo's missions - after Kakashi was enrolled in Konoha's Ninja Academy - Sakumo made the decision to save the lives of his teammates rather than complete the assignment. The mission's failure had disastrous consequences for the Land of Fire, causing many in Konoha, including the teammates he saved, to vilify him for abandoning his duties. Disgraced, Sakumo committed suicide. Seeing what his father went through and determined not to make the same mistakes, Kakashi decided that following the Shinobi Rules must always take priority.
In the Academy, Kakashi earned top grades, earning him recognition as a prodigy and the best of his generation. Ultimately, he became very popular amongst his peers. With his talents soon being recognised, at age 5, Kakashi graduated from the Academy at the top of his class in a single year. Upon becoming genin, he and his classmates, Rin Nohara and Obito Uchiha, were teamed together under the leadership of Minato Namikaze.
In the anime, Minato gave the team a bell test at its formation, assigning the three to take the two bells he kept on his person. Minato often held back less against the prodigious Kakashi than with Rin and Obito so they couldn't obtain the bells without teamwork. Unfortunately, Kakashi realised this, but only used Obito and Rin as a means to an end to obtain the bells. Nonetheless, he passed them because they accomplished the goal of the test by working as a team. Although Minato did encourage them to improve their teamwork afterwards, a message that Obito and Rin took to heart, but fell on deaf ears with Kakashi. Team Minato would go on many missions during its career, but Kakashi's devotion to the rules often made him difficult to work with; Obito, already jealous of Kakashi's natural talent and popularity, was frequently at odds with him about this behaviour.
At age 6, Konoha officials allowed Kakashi to compete in the Chūnin Exams with his team, which he passed by defeating Might Guy and became a chūnin.