Butler was commissioned a 1st lieutenant in the 2nd Pennsylvania Battalion on January 5, 1776 and was promoted to captain in the 3rd Pennsylvania on the 4th of October the same year. He resigned from the Continental Army on 17 January 1781.
In 1783 he became an original member of the Pennsylvania Society of the Cincinnati.
Butler was a major in the levies [?] under Major General Arthur St. Clair in 1791. He was wounded in action near Fort Recovery, Ohio, on 4 November 1791, in St. Clair's Defeat. His brother Richard Butler was killed in the same battle.
He was commissioned on April 11, 1792, as a Major of Infantry in the United States Army and was assigned to the 4th Sub Legion on 4 September 1792. He was promoted to lieutenant colonel on 1 July 1794. The 4th Sub Legion was re-designated as the 4th Infantry Regiment on 1 November 1796.
On April 30, 1801, a General Order issued by Major General James Wilkinson, Commanding General of the Army, abolished the queue as an acceptable military hairstyle, breaking the custom of a century. Butler applied for and was granted an exemption from the order.
Within two years, however, the exemption was mysteriously revoked and Butler stood before a court martial which ended in a recommendation of reprimand. Butler was promoted to colonel of the 2nd Infantry Regiment on 1 November 1802 and was assigned to New Orleans, and was again ordered to cut his hair. He again refused and was again before a court marital. He was found guilty of mutinous conduct with a recommendation for a year's suspension.
Within days of the verdict, Butler was ill with yellow fever. He died at his nephew's plantation a short time later leaving instructions in his will: "Bore a hole through the bottom of my coffin, right under my head, and let my queue hang through it, that the damned old rascal will see that, even when dead, I refuse to obey his orders." His last wishes were obeyed. His obituary in the Carlisle Herald Nov. 1, 1805 read: "Now sleep the brave! who sink to rest; With all their country's wishes blest."
Colonel Butler died of yellow fever on 7 September 1805, in St. Charles Parish, Territory of Orleans (today's Louisiana). He is buried in the Ormond Plantation Cemetery in St. Charles Parish.