The villagers' attitude towards Naruto would shift. They have come to see Naruto as a symbol of hope and a powerful ninja. If he gives up, some might be disappointed, while others who were always a bit jealous or suspicious of him might feel vindicated. His friends among the villagers, like Shikamaru or Choji, would be sad to see him go from the ninja life but would still try to maintain their friendship with him in a different context.
Maybe he starts a new life as a normal civilian. He could find a simple job in the village, like working in a shop or helping with farming.
His relationship with Sasuke would likely become more strained. Since Naruto is forced to be a ninja, Sasuke might see him as being part of the system that he resents. Naruto's friends like Sakura would also be worried about him. They might try to find a way to free Naruto from whatever is forcing him to be a ninja. His relationship with his teachers, like Kakashi, would also change. Kakashi might be conflicted between following the rules that are forcing Naruto and protecting Naruto from harm.
His relationships would be completely turned upside down. For example, Naruto wouldn't have the same camaraderie with his fellow Leaf Ninja. Instead, he would form new bonds with the Sound Ninja. He might have a mentor - like relationship with Orochimaru or one of the other high - ranking Sound Ninja. His relationship with the villagers of Konoha, who once shunned him but later accepted him, would be one of hostility. And his relationships within the Sound Ninja village would be based on their own values and power dynamics.
His relationship with the older generations like Kakashi and Tsunade could shift. They would see Naruto as a more mature and capable ninja. Naruto could use the insights from his doujutsu to contribute more to the decision - making in the village, and they would respect his opinions more.
The story would take a very different turn. The dynamic between Naruto and the rest of the characters would change. For example, Naruto might become more focused on protecting the village without the distraction of Sasuke. His relationships with other friends like Sakura might also be affected. Sakura might be disappointed in Naruto at first for giving up, but then they could bond over the loss of Sasuke in a different way.
If Naruto gives up on his dream in a fanfiction, the whole Naruto universe would be drastically different. His friends would be shocked. For example, Sasuke might not have the same motivation to grow stronger as Naruto's unwavering determination was always a driving force for him. The village of Konoha would also lose a great source of inspiration. Naruto was always the one to believe in the village's future and strive for its betterment. Without his dream, the hope he spread might fade away, leading to a more gloomy atmosphere in the village.
One possible reason could be that he experiences a great loss, like the death of a dear friend. This might shatter his confidence and make him lose his passion for being a ninja.
With his friends, it might create a sense of shock. His friends who have always supported his dream of being Hokage would be surprised. Some might be disappointed, like Sakura who has seen Naruto's growth towards that goal. But others, like Shikamaru, might understand his decision and still support him in whatever he chooses to do. With his family, if he has a family at this point, it could bring a sense of relief as they may not want him to be in such a dangerous and stressful position.
Well, his relationship with the village as a whole would be one of enmity. But on an individual level, some of his friends might secretly support him. Naruto would likely be more cautious about trusting new people. His connection with the other jinchuriki might become stronger as they can relate to his situation of being an outcast. His relationship with Kakashi - sensei would be filled with conflict. Kakashi would have to balance his duty to the village and his feelings for Naruto, who he has trained and cared about.
One possible reason could be that he experiences a great personal loss. Maybe he loses someone very dear to him during a mission, like his best friend or a respected mentor. This loss makes him question the whole ninja life and all the violence and danger it entails, leading him to give it up.