
Weapons and armor can be leveled up and upgraded at the Blacksmith of the Eternal Rift in Nioh 3. See how to level up weapons and armor, how Soul Matching works, and other upgrades available for your character's gear here!
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Towards the end of the The Hamamatsu Incident quest, after defeating Jakotsu-baba, you will gain access to the Eternal Rift home base. You can find the Fox-masked Blacksmith inside the south-western building of the area.
At this stage, the Blacksmith only offers the Forge, which allows you to upgrade equipment rarity from common, uncommon, rare, and exotic. Each upgrade requires increasing costs in crafting materials obtained by dismantling weapons and armor, as well as gold.

To upgrade the Blacksmith itself, you must complete a short quest. After speaking to the Blacksmith the first time, they will give you the quest A Fierce Flame. This leads you to the western end of the 1572 CE Warring States area, where you collect Kagutsuchi's Magatama.
Return this item to the Fox-masked Blacksmith at the base, and you will now have access to Soul Match and Soul Extract, vital for further upgrading your weapons and armor.

With Soul Match and Soul Extract unlocked after completing the Blacksmith's quest, you can now upgrade your weapons and armor even further. There are two options when you select Soul Match: Select Level and Select +Value

With Select Level, you can increase weapon or armor levels using Yellow Soul Ores and gold. At higher levels, Viridian Soul Ores (Green) are also required to continue upgrading. Your gear can be enhanced well beyond level 100 through level enhancement soul matching, increasing attack power each level.
The second option, Select +Value, provides further upgrades +value upgrades (for example, Wooden Sword to Wooden Sword +1) using blue Azure Soul Ores and gold. While this process is the most expensive, it provides the largest boost to damage and defense. Weapons with a +value can also be remodeled to further tailor their Stat scaling.

While not a direct upgrade, a weapon's stat scaling can be remodeled at the Blacksmith once a weapon has a +Value (at least +1). This allows you to the change the weapon's stat scalings to better match your build and playstyle.

Soul Extract standard weapons and armor to obtain Yellow Soul Ores and higher-level ones for Viridian Soul Ores. Later on, Azure Soul Ores can be extracted from weapons and armor that are at least +1, which drop more often from enemies in the mid-late game. These Soul Ores are what you need for Soul Match upgrades.
Simply using a weapon to increase its Familiarity will make it stronger over time. This is your only way of leveling up your weapons before unlocking the Blacksmith and Soul Match.

Beginner's Guide to Nioh 3: Tips and Tricks
How to Level Up Weapons and Armor



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