Butler's father, George Butler, had been the Harrow headmaster before him. Educated at Harrow and at Trinity College, Cambridge, he was elected to the Harrow headmastership at the age of 26.

The young Butler, opposed at first by an old-fashioned staff, overcame their opposition through tact and firmness. As a brother-in-law of the scientist Francis Galton (Galton, Sir Francis), he was in sympathy with the scientific thought of the period; during his headmastership science was officially recognized as a subject in the school curriculum. He also created (1869) a modern division of studies, with the proviso that only boys with a satisfactory record in classics should be admitted. He was a great lover of music, and during his headship the cycle of Harrow school songs was completed. He was known for his warm Sunday sermons and his Latin verses; his friends said that he turned Harrow into a miniature Parnassus.

Butler's headmastership ended when he became master of Trinity College, Cambridge (1886–1918), but this did not diminish his interest in Harrow. At Trinity he formed lines of communication among various religious denominations and showed great interest in classes for workingmen. In 1912 he was appointed chaplain-in-ordinary to the king. His published works consist chiefly of sermons and his autobiography, Some Leisure Hours of a Long Life (1914).