"Era of Warring States" (戦国時代, Sengoku Jidai) is episode 368 of the Naruto: Shippūden anime.
As Hashirama laments on betraying his friend, Butsuma tells Hashirama he has one of two choices: either gather intelligence on the young man and report to them or else be seen as a traitor for his actions. Hashirama begrudgingly accepts his mission but he is intent on helping Madara. The next time they meet, Hashirama and Madara exchange their stones across the river, telling each other to escape. Before they have a chance to leave, both their fathers and remaining brothers respectively prepare and engage in battle. Knowing that their power was more or less even, in order to gain the upper-hand, Butsuma and Tajima decided to target Izuna and Tobirama respectively, hoping to use the shock of a parent losing a child before their very eyes as a method to gain an advantage. Their efforts are thwarted however by Hashirama and Madara who both see the attack on their brothers as an unforgivable act. Madara declares that they had reached an impasse, noting that their dreams die there. Still willing to fight, Tajima questioned Madara if he was prepared to take them on, but Madara noted that Hashirama was stronger than he was and the outcome would not be in their favour. As they prepared to depart, Madara stated that the next time they would see each other was on the battlefield, activating his Sharingan for the first time. As the years went by, the battles between the two clans continued and during a fierce battle with many casualties, Tobirama was able to mortally wound Izuna in a fierce exchange on the battlefield. As Hashirama once again extended his hand to Madara, Izuna told his brother not to accept and they soon retreated, leaving the other remaining Uchiha to surrender. The next time the Senju brothers encountered Madara again, he informed them that Izuna had succumbed to his injuries and had left him his eyes to continue protecting the clan. Revealing that he had acquired the Eternal Mangekyō Sharingan, Madara was still defeated. As Tobirama was prime to deliver the final blow, he was stopped by his brother who still wanted to seek peace. However, the fallen Uchiha noted that the price Hashirama had to pay to regain his trust was either that Hashirama had to kill himself, or his beloved brother. Questioning if Madara was a crazed person, Tobirama interrogated whether or not his brother intended to kill him. However, all were shocked when Hashirama was intent on killing himself, but not before telling everyone present to swear that the feud between Senju and Uchiha would finally end. The act was however stopped by Madara, and he and Hashirama struck a peace treaty and with it, Konohagakure's creation soon followed.
When Madara activated his Sharingan, it has only one tomoe instead of two.
When Hashirama tried to broker truce the first time, Madara was about to accept it. In the manga, he only contemplated accepting the truce. In both cases regardless, Izuna talked him out of it.
The Sengoku period was an actual period in Japanese history. Taking place between circa 1467 and 1603, it was a period when regional daimyō sought to increase their power at the cost of the central administration of the shogunate. It is named for a period in Chinese history that is called "Warring States period" by western historians.