Sega produced its own home version of Shinobi for their Master System game console. It was released in Japan on June 19, 1988, with subsequent releases in North America and Europe. Some of the play mechanics from the original coin-op version were altered for this version. Instead of the one-hit kills from the arcade game, the player now has a health gauge that allows Musashi to sustain more damage before losing a life, although this comes with the trade-off that touching an enemy causes Musashi to lose health.

While the player still rescue hostages in this version, it is now an optional task and not mandatory to complete the game. However, rescuing hostages allows the player to upgrade both their close and long-range weapons, as well increase their maximum health gauge or restore it. Additionally, rescuing certain hostages is a requirement to access the game's bonus stages, which now occur after the regular stages instead of each boss fight. The ninjutsu skills are now obtained from completing these bonus rounds and the player may hold up to four stocks. The input method of performing these ninja arts is also different as well. The player can use between three different close-range weapons (in addition to the default punches and kicks), four long-range weapons (including an upgrade to the default shurikens), and six ninjutsu spells.