Butler was born at Putney, the son of the Rev. William John Butler (1818-1894), later Dean of Lincoln, by his marriage to Emma Barnett (1813-1894), a daughter of George Henry Barnett, a banker, of Glympton Park, Woodstock.
Brought up at Wantage, where his father was Vicar, in 1853 Butler won a scholarship to St Andrew's College, Bradfield, but in 1857 he migrated to Eton, after which he gained a scholarship at Trinity College, Cambridge.