Before Marth and his forces take on Medeus, Gotoh sends them to a tower in another world telling them to seek the aid of the tower's master. After passing the trials within, Marth's soul cries out to Nagi, waking her from her slumber. Although she can only remember her own name and has vague familiarity when Marth mentions Gotoh, she feels that she must join Marth in his battle against Medeus and presents him with another Falchion. If she faces Medeus in battle, he will note that he was not the only dragon revived and that she had recovered even less power than he had. In the end, Nagi disappears after the final battle, even before Marth could thank her for her help.
To reach the chapter that visits the tower, Tiki must be slain and the Falchion must be lost. When Nagi joins, she gives Marth a weaker version of the Falchion.
Her appearance being similar to Tiki's, her possession of the Falchion, her familiarity with Gotoh's name, and her desire to stop Medeus implies that she is either Naga or her reincarnation. This is more apparent in the Japanese version, where her ending title is "Divine Dragon King's Incarnation" ("Holy Avatar" in the English version) and the event in which she first appears is labelled as "Revived Divine Dragon King" ("Deity Reborn" in the English version) in the Event Recap. Also her codename in both the game data and in the official site is "Naga". The only problem with this theory is that Nagi does not have any conversations with Tiki, but Nagi and Tiki are canonically not supposed to exist at the same time although players can use the Aum Staff to revive Tiki after recruiting Nagi. However not every related pair of characters have conversations.
Another theory is that she is an alternate form of Tiki. After Tiki dies, Gotoh remarks that she is simply sleeping and Nagi, who just awoke from a sleep, could be Tiki from the future. The similar structure of the Alterspire and the Fane of Raman could be because they are the same place in different timelines. Due to Tiki and Nagi's similar appearance, this theory is fairly popular, despite Tiki not having a direct connection to Medeus or the Falchion and a lack of in-game evidence towards it. Gotoh's comment could just as well be a reference to the sequel where Tiki returns to her sleep. Medeus's battle conversation with Nagi also seems to disprove this theory, since he claims to be familiar with Nagi, but Tiki was born after Medeus was defeated by Naga.