“It seems that whoever attempts the rite must brave Naga's fire. If both body and spirit survive the agony, they are blessed with the dragon's power. Otherwise, the candidate...dies.”
—Chrom explaining the ritual to the Avatar.
To perform the ritual, the Fire Emblem must have all 5 Gemstones placed in it. According to Tiki the ritual must take place at the holiest location of Naga's influence, which is normally Mount Prism. Only those of Exalted blood may perform the ritual and they must recite the oath. Naga will bathe them in her holy flame; if their convictions are too weak, they will die. If their will burns stronger than the flame, the Falchion's true power will unlock, granting the wielder the power to fight against Grima. However, even with her blessing, the new power of the Falchion cannot kill Grima; it can only put him into dormancy for 1,000 years. If Naga is dead, a descendant of Naga, such as Tiki, can assume the role of Naga and perform the ritual in her stead. The Falchion's hilt will glow a blue hue and the blade will glow a faint red/gold color to show the full power of the Falchion.
In the The Future Past 3, thanks to the efforts of the children, Lucina received the Fire Emblem and all 5 gemstones, allowing her to perform the ritual. However Mount Prism fell to the Risen, which prevented her from performing the ritual there. Tiki appears in spirit and assumes the role of the new Naga of the world. Grima told her that even if she became Naga, the ritual could not be performed due to the fall of Mount Prism. Tiki revealed that as long as Lucina performs the ritual in the holiest place of Naga's influence, it does not have to take place at Mount Prism. By defiling Mount Prism and leaving Tiki's corpse in Ylisstol, Ylisstol became the new holiest place in the world. Lucina performed the ritual immediately and was accepted by Tiki, allowing Lucina to slay Grima, ending the future of despair.
Oddly, Lucina's Parallel Falchion has the power to deal effective damage against Grima while Chrom's Falchion in its base form cannot until it becomes the Exalted Falchion, despite being technically the same sword. It is hinted that Lucina managed to collect most of the Gemstones, but not all, and performed the Awakening with the incomplete set. Without the full power of the Fire Emblem however, she could not unlock her Falchion's full power.
"Hear me, Naga/Tiki! I bear proof of our sacred covenant!"
"In the name of the exalted blood, I ask for the divine dragon's power!"
"Baptize me in fire, that I may become your true son/daughter!"
- According to Validar, the Awakening rite isn't limited to just those of the Exalted blood and Naga, but can also be used for awakening Grima.