There are few characters in the Naruto series as tragic as Itachi Uchiha. In a world where the way of the ninja reigns supreme and people vie to be strongest shinobi around, Itachi was literally one of the strongest ninjas ever. As he was a prodigal member of the prestigious Uchiha Clan, his skills were practically unparalleled. This made him a formidable foe when he joined the infamous Akatsuki gang. But in the last moments of his life, he died with a smile on his face. What prompted that bittersweet moment?
Even when he was young, Itachi found himself working as an assassin for the Hidden Leaf Village. He was tasked to spy on his clanmates and report back on their plans for insurrection. At the height of the tension, Itachi was forced to slay his entire clan. He managed to spare his brother Sasuke, who was unaware of the truth of his actions. Itachi tearfully exiled himself from the Hidden Leaf to cover up the conspiracy.
Years later, they would meet in one more clash.
Why does Itachi Uchiha smile when he dies? It has to do with Sasuke.
Itachi and Sasuke were initially close as siblings, with Itachi often teasing his younger sibling and poking him in the forehead while he hid dark truths from him. After Itachi killed his fellow Uchiha, Sasuke vowed to avenge his clan by killing Itachi. Sasuke goes to great lengths to attain enough strength to defeat his monstrously powerful brother, even going so far as to defect from the Hidden Leaf Village and betray Naruto Uzumaki.
After years of training, Sasuke was ready to fight Itachi.
Despite Itachi's considerable skills, he is quickly approaching his limit by the time he and Sasuke begin their final fight. His mastery over the Mangekyō Sharingan would soon lead Itachi to blindness, and the only way to prevent this was to steal his brother's eyes.
This places them on even ground as the two of them exchange blows using their respective ninjutsu mastery. Eventually, Itachi gains the upper hand, but only after expending an immense amount of chakra.
In his last moments, it seems as though Itachi is going to reach to take out Sasuke's eyes. Instead, he teasingly pokes him in the forehead as he did so often in his childhood. He then dies with a smile on his face, with Sasuke having fulfilled his now hollow revenge.
Sasuke later learns the truth about Itachi's actions from Madara Uchiha, discovering how the Hidden Leaf Village forced Itachi to murder the Uchiha against his will.
Itachi's will to maintain peace in the Hidden Leaf Village could only be rivaled by his love for his little brother. He knew this act of betrayal would scar him for life, and in his own way, encouraged Sasuke to become strong enough to survive the cruelty of their society and the dangers of being a ninja. In defeating his big brother, Itachi knew that Sasuke would be okay, having given him a reason to become that strong. Who wouldn't smile after seeing how big their younger sibling had grown?
Itachi's greatest hope was that Sasuke would eventually use this power to free himself of the shackles of vengeance, become a better ninja than he, and not swear revenge on the Hidden Leaf Village.
Sasuke would go on to immediately swear revenge on the Hidden Leaf Village.