Disclaimer: I don NOT own Naruto.
After the child had been born he, Jiraiya, pleaded with the Sandaime to be the child's guardian. The Sandaime turned him down telling him that it would be suspicious for a yellow haired child to grow up in the care of the Konoho's Yellow Flash's old sensei. The child would be a target if his heritage was discovered, plus the fact that Jiraiya was a Sannin could lead to more powerful shinobi after the boy. Jiraiya couldn't argue with the Sandaime.
He left Konoha when the child became a toddler. He couldn't stand to watch how the villagers treated the boy even at a young age, nor could he stand not being able to take care of the child. He sent his toads to watch the child and tell him how he was doing, along with having them deliver presents and later money when he was older.
When the boy became a shinobi he set of for Konhagakure determined to teach the boy, whether the Sandaime wanted him to or not. He knew the older the boy got the more dangerous people would be after him for what he carried, and because eventually some one would figure out he was the son of the Yondaime Hokage
It was right before his battle with Pain that he knew he would die. He sat down and wrote a letter, and found the keepsake he had been holding onto. As he wrote he wished he could tell the boy more and in person. The letter read:
This was your father's. I know he is proud of you and that you are ready to have it. I've been holding on to it sixteen years for you. Show this letter to Kakashi if you want to know who your father was and more about him. He also has a gift to give to you from your mother. I love you Naruto, but I can no longer be there for you
Love your godfather,
With trembling hands and silent tears he gave the letter and present to one of his toads. "You know what to do." He told the toad before he left.