Duncan from Dragon Age: Origins: In a universe as dark and depressing as Dragon Age can be, right from the start of the game Duncan is a beacon of hope before the player becomes one. Unfortunately, he doesn't last very long.
If he survived the first game, Zevran has been spending most of the time frame that Dragon Age II encompasses only killing the Crows that try to track him down. Okay, nothing too new, and Zevran was always much more laid-back than one would expect from an ex-assassin, but then when the Dalish offer him sanctuary in Act 3, he turns them down to hide out in the nearby caves so that none of them will get caught in the crossfire. Considering this is the man who casually admitted he enjoyed killing (to an extent) and has killed innocents, or gotten them killed through his actions more than once, in the first game, this is quite the Character Development.
From the same game, Fenris thaws out towards the end of the game towards Varric, Aveline, Isabela, and Donnic, and particularly Hawke (especially if he's romanced). Anders, on the other hand...
For someone who started as such a minor character, Cullen has gone through quite the arc. Starting as a naive young Templar who might have been infatuated with a female PC, what happens at the Circle he's stationed at drives him to hatred of all mages, advocating putting every one of them down. By Dragon Age II, he's calmed down a bit and is one of the few reasonable people in the story, but still has a very large amount of Fantastic Racism and is willing to overlook some of the greater atrocities committed by his fellow Templars to innocent mages. However, once his commander, Meredith, goes too far off the deep end with her fanaticism, he turns on her and is willing to let a mage-supporting Hawke go. Come Dragon Age: Inquisition, where he apparently went through some soul-searching in between games, having left the Templars, feeling that they had lost their way, and is firmly disgusted by the actions they are now taking. While he still feels that mages are dangerous, almost all traces of his Fantastic Racism are gone, and he is fully willing to work with them, and work loyally for a mage Inquisitor.
The rival Silver from Pokemon Gold And Silver could count as this. He goes from a cruel, harsh person, but eventually becomes friendlier towards the player and his own Pokémon- to the point where his Golbat evolves into a Crobat after reaching high happiness.
Mido was the resident jerkass in Kokiri Village in The Legend of Zelda: Ocarina of Time, giving Link shit over not having a fairy, even going as far as calling him "Mr. No-Fairy". When you meet him seven years later, he's guarding the entrance to the Forest Temple, but his tone is very different. He says he wishes he could take back everything he said about Link (unaware that he is actually talking to Link as an adult) and tells you that if you ever met Link, to tell him that he [Mido] was sorry for being such a jerk to him.
Also from the Zelda series is Groose from Skyward Sword. He starts off as a typical arrogant and pompous Jerk Jock who has it in for Link, but at one point he follows Link to the land below the clouds and witnesses Link fighting and resealing the game's Sealed Evil in a Can. Though he's at first disillusioned over his own apparent uselessness, he comes to respect Link and begins to grow considerably more noble, even becoming a crucial ally to Link in a number of boss battles.
You know he's changed considerably when you find yourself cheering him on when he jumps into the fray and helps Link.
Adelbert Steiner from Final Fantasy IX starts out as the most reluctant member of the party, only going along to protect Princess Garnet. He has a big grudge against Zidane for "kidnapping" her (it's complicated) and for being a no-good scoundrel, but he eventually realizes that Zidane is actually a good person.
In the first two games of the Mass Effect series, Turian Councilor Sparatus is an ass to Shepard and to humans in general. Come the third game, when it's been made clear that Shepard was utterly correct all along, he's the first one of the trio to provide Shepard aid in the form of vital intel, and is the only one of the three who doesn't start off as cold and dismissive toward Shep. Also, the third game has now-Councilor Udina, after being such a dismissive jerk in the previous game, being surprisingly supportive and polite toward Shepard... only to orchestrate an attempted Cerberus coup of the Citadel later on, resulting in his death at Shepard's hands. Though even then, he pulled the attempted coup because he felt that Cerberus were willing to help him save Earth's people where the Council apparently weren't.
Also, many of your crewmates can do this over the course of the series, particularly for Paragon Shepard. You can turn Garrus from a pure Cowboy Cop into someone who generally respects the rules and no longer believes the end justify the means. Wrex starts out as a typical Kroganwho is also disillusioned by them, and then ends up doing something about it by strong-arming himself into becoming the de facto leader if all Krogan kind, demolishing many of the more self-destructive Krogan traditions to unify his people. Miranda goes from an Ice Queen and Knight Templar to being a Not So StoicAtoner in the 3rd game. Grunt becomes much more respectful, especially if you do his loyalty mission, and Zaeed learns to put the team first if you choose to save the workers on his loyalty mission (and have high enough charm skills). But special mention must go to...
Jack. By the end of the series, she's taken at least eleven levels. When you first meet her, she is a severely Broken Bird and a psycho who wants to kill everyone she meets because "every times someone that's not me dies, I figure my chances of survival go up a little". Shepard, particularly Paragon Shepard (and even more particularly if you romance her), starts to peel away her layers, gradually getting her to be more trusting and cooperative. In her loyalty mission, she finally comes to terms with what happened in her childhood, and starts to become a lot more of a team player, especially in the suicide mission. By Mass Effect 3, she's toned down the wild look and become a Badass Teacher who is loved by her students and will do anything to protect them. She even has a swear jar, not that it helps much. According to her, she learned the value of teamwork on the suicide mission, and Shepard him/herself has taught her a lot about leadership.
Shepard can be played this way if you picked the Ruthless trait and/or imported a heavily Renegade save from the first or second game, then incline more towards Paragon choices in the second or third game.
Admiral Zaal'koris becomes a lot friendlier towards both you and Tali in the third game after being a jerk towards both of you in the second; if you played it right, Tali is now his main ally on the Admiralty Board, which goes a long way to making people less obnoxious, especially since Tali and Shepard are now pretty much the only hope of getting out of a bad situation without most of the Migrant Fleet being destroyed in the process.
The Reapers in the Extended Cut Synthesis ending. Since their mandate to protect organic life from synthetic life no longer applies because those boundaries don't really mean anything now, they start bringing the accumulated knowledge of the societies they've destroyed and helping with the reconstruction of all the worlds they've devastated, and are even shown putting a mass relay back together.
Miles Edgeworth goes from being the ruthless Demon Prosecutor, concerned only with maintaining his perfect prosecution record even through shady means, to pursuing the truth for truth's sake and being a genuine friend and ally to Phoenix, Maya, and others (most notably, making an impromptu international flight and taking on the role of defense attorney - something he could get into trouble for if caught - simply because Phoenix needed him). By the time we see him in Investigations, he's willing to risk loss of career and arrest in order to help Kay Faraday.
In Phoenix Wright: Ace Attorney - Dual Destinies , Simon Blackquill is introduced as a murderer and makes his first appearance manipulating the judge into letting him have his way, interrupting Apollo, and generally being the jerk most prosecutors are expected to be. In the third trial though, he joins in with everyone else to break Athena out of her Heroic BSOD, reminding her of the reason she became a lawyer and how she must not let a certain someone down. After he's acquitted in the last trial, he then is incredibly cooperative with Phoenix, backing his requests, sending his hawk to keep the Phantom from hacking Athena's Mood Matrix, and ripping the Phantom's mask to reveal his deception. In fact, the most antagonistic he is is the occasional reminder to provide evidence to back claims, which Phoenix reminds his colleges is what Simon has to do as prosecutor.
Hijikata Toshizo in Hakuouki is called the "Demon Vice-Commander" of the Shinsengumi for the iron fist with which he commands and for his unflinching willingness to enforce the group's rules of conduct and command or personally perform morally distasteful actions. He gets worse following Kondou's capture and execution, to the point that during the assault on Utsunomiya Castle he kills a soldier who tries to flee, but by Hakodate he manages to make peace with the inner turmoil that's been driving him and he becomes a much gentler and more approachable leader who says the men under his command are "like sons" to him.
Tales of the Abyss makes this a big part of Luke's character arc. He starts out as a certified Jerkass, selfish, irresponsible, disrespectful and childish. One heftyWham Episode and an Important Haircut later, he resolves to change for the better. He starts thinking for himself, respecting his comrades, and actively trying to win back their trust to the point where he's willing to pull a Heroic Sacrifice to make up for his misdeeds.This happens right after said Important Haircut and is pretty much the first part of his Character Development in a nutshell (spoilers up to the first visit to Aramis Springs).
Tales of Destiny: In the first game, Leon Magnus is a huge Jerkass Woobie who uses shock tiaras on his teammates, snarks about everything, and rages at any kind behaviour shown towards him. He ends up betraying the party and dying, though for sympathetic reasons. He returns in the second game as mysterious swordsman Judas, and he's matured into a quieter snarker clearly devoted to the party (especially Kyle, his nephew), going so far as to apologize to a character for not telling her her brother would die and praying his new friends will stay safe when he's erased from existence and can't look after them anymore. The remake of the first game makes this a case of Characterization Marches On, as he's retconned into a much nicer character all-around who uses a Jerkass Façade as a defense mechanism.
Umineko: When They Cry Battler is rather insensitive to other at first. He improves as he continues and discovers the truth.
The Boss in the Saints Row series goes from merely taking part in criminal activities to a boarderline sociopath whose possibly only saving grace is caring about the other Saints. Saints Row: The Third has the gang become Lighter and Softer and the Saints and Boss really only fight other gangs, corrupt police and soldiers who place the city under martial law. Boss also becomes a lot more caring throughout the game, and by Saints Row IV s/he begins as utterly heroic and only gets better from there, to the point s/he would actually make an off kilter but still fine President.
In the Animal Crossing series, the Grumpy and Snooty villagers have become nicer with each game. The grumpy villagers have gone from jaded jerks to just being rough on the edges, while snooty villagers have gone from narcissistic and elitist to kind but with refined tastes.
Gracie in New Leaf, who actually gives you one of the four rare mannequins after her store in the main street opens, and she even understands if you decide not to buy one of her clothes/furniture.
Happens before the game in Tears To Tiara 2. Hamil was a very cold and distant child. He doesn't think twice in resorting to scorched earth tactics or destroying his own capital city in order to win a battle simulation. And he doesn't understand why his father find this sad. In the seven years after Hasdrubal's death, having had to watch over the Canaanites suffer under the rule of The Empire, he learns why. He now does his absolute best to protect everything and everyone. He will still use those tactics, but only if there is absolutely no other choice.
The Great Khans in Fallout: New Vegas, compared to the Khans of Fallout1 and Fallout2. The Khans of 1 and 2 were all about the Rape, Pillage, and Burn, and any interaction was pretty much guaranteed to end in violence. The Great Khans, in contrast, make a living selling drugs and can be dealt with entirely through diplomacy. Sure, they aren't angels, but the Great Khans are far nicer than the Khans ever were.
Dante in Dm C Devil May Cry initially starts out as an uncaring, dick-ish guy. As the game progresses, however, he begins to mature and his interactions with Kat, especially the lengths he goes to just to save her, are pretty much the best indications of him invoking this trope. By the end, he has inherited several of the old Dante's traits, kindness and sense of justice included. Dante, however, will still take the time to fling insults at his enemies.
In Dangan Ronpa, Byakuya Togami is a condescending Smug Snake who participates in the killing game with a perverse sense of glee and makes it very clear he eventually intends to commit the perfect murder and graduate. In Super Dangan Ronpa 2, although he retains his condescending attitude, the first thing he does when everything goes to hell is to declare himself leader and promise that nobody will die under his watch. Subverted when it turns out the Byakuya in the sequel is an impostor who gave the real Byakuya more credit than he deserves, but then double subverted when the real Byakuya risks his life in order to save the surviving protagonists.
Morte takes off a few of her rougher edges over the course of Sands of Destruction. While she's quite selfish and interested in nothing but the destruction of the world at the start, by the end she's capable of empathy, stating that if any of her team mates have a problem, it's her problem, too, and she will help solve it with just as much gusto as she puts into solving her own issues. She even recants her path of destruction, vowing to rebuild the world instead, and genuinely falls for Kyrie, instead of just seeing him as a Person of Mass Destruction she could use for her own ends. She is still very impulsive and prone to acting without thinking, and still has a tough demeanor on the outside, but it's clear a softer heart has grown under there.