Butterfield was born in Lund, British Columbia in 1973 to Norma and David Butterfield and grew up for the first three years of his life in a log cabin without running water. Butterfield's grandfather came from Poland to Canada at age 17 at interwar period. His family moved to Victoria when Butterfield was five years old; as a kid, Butterfield taught himself how to code.
Butterfield was educated at St. Michaels University School in Victoria, British Columbia and made money in university designing websites. He received a B.A. degree in philosophy from the University of Victoria in 1996. Butterfield went on to earn a Master of Philosophy from the University of Cambridge in 1998, where he specialized in the philosophy of biology, cognitive science, and the philosophy of mind.
In 2000, Butterfield worked with a friend to build a startup called Gradfinder.com. Following Gradfinder.com's acquisition, he worked as a freelance web designer. Butterfield also created a contest called the 5K competition centered around people designing websites under 5 kilobytes.
In the summer of 2002, he co-founded Ludicorp in Vancouver with Caterina Fake and Jason Classon. Ludicorp initially developed a massively multiplayer online role-playing game called Game Neverending. The game did not launch, but the company then started a photo-sharing website called Flickr. In March 2005 Ludicorp was acquired by Yahoo!, where Butterfield continued as the General Manager of Flickr until he left Yahoo on July 12, 2008.
In 2009 Butterfield cofounded a new company called Tiny Speck. Tiny Speck launched its first project, the massively multiplayer game Glitch, on September 27, 2011. Glitch was later closed due to its failure to attract a sufficiently large audience. The game world closed down on December 9, 2012, but the web site, with most of the content, remained online. In January 2013, it was announced that the company would make most of the game's art available under a Creative Commons license. On December 9, 2014, a fan project to relaunch Glitch under the name Eleven began alpha testing.
In August 2013, Butterfield announced the release of Slack, an instant-message-based team communication tool built by Tiny Speck while working on Glitch. After its public release in February 2014, the tool grew at a weekly rate of 5 to 10 percent, with more than 120,000 daily users registered in the first week of August 2014. As of August 2014, Slack had garnered US$1.5 million in revenue and raised US$60 million in venture capital. In early 2014, the data for Slack's first six-month usage period since the preview release was published, showing that nearly 16,000 users were registered without the use of any form of advertising—growth was based solely upon word-of-mouth.
Butterfield secured an office for Slack employees in San Francisco in 2014 and was expected to commence recruitment during the second half of the year.
As of December 2015, Slack had raised US$340 million in venture capital and had more than 2 million daily active users, of which 570,000 were paid customers.
Slack was named Inc. Magazine’s 2015 company of the year.
In 2005, Butterfield was named one of Businessweek's "Top 50" Leaders in the entrepreneur category. In the same year, he was also named in the TR35, a list collated by MIT in its MIT Technology Review publication, as one of the top 35 innovators in the world under the age of 35 years. In 2006, he was named in the "Time 100", Time magazine's list of the 100 most influential people in the world, and also appeared on the cover of Newsweek magazine.
In November 2008, Butterfield received the "Legacy Distinguished Alumni Award" from the University of Victoria.
In 2015, Stewart was named the Wall Street Journal's Technology Innovator for 2015, awarded TechCrunch’s Founder of the Year Crunchie, and included in Vanity Fair’s New Establishment, Advertising Age’s Creative 50, and Details’ Digital Mavericks lists.
Butterfield was married to Caterina Fake, his Flickr co-founder, from 2001 to 2007. They have one daughter together, who was born in 2007.