Butler was born to Patrick and Mary Ann Butler, Catholic immigrants from County Wicklow, Ireland. (Coincidentally, they only met in Galena, Illinois, even though they left the same part of Ireland for the same reason - the Irish Potato Famine.) Soon, the couple settled in Pine Bend (now Rosemount), Dakota County, Minnesota, where Butler was the sixth of nine children born in a log cabin; all but one, his sister, would live to adulthood.
He graduated from Carleton College, where he was a member of Phi Kappa Psi Fraternity. Admitted to the bar in 1888, he was elected as county attorney in Ramsey County in 1892, and re-elected in 1894. Butler joined the law firm of How & Eller in 1896, which became How & Butler after the death of Homer C. Eller the following year. He accepted an offer to work in St. Paul, Minnesota, where he took care of railroad-related litigation for James J. Hill, but returned to private practice in 1905 and rejoined Jared How. He had also served as a lawyer for the company owned by his five brothers. In 1908, Butler was elected President of the Minnesota State Bar Association. From 1912 to 1922, he worked in railroad law in Canada, representing, alternately, shareholders of railroad companies and the Canadian government; he produced favorable results for both. When he was nominated to the United States Supreme Court in 1922, he was in the middle of winning approximately $12,000,000 for the Toronto Street Railway shareholders. He married Annie M. Cronin in 1891.
Although he was supported by Chief Justice and former President William Howard Taft, Butler's opposition to "radical" and "disloyal" professors at the University of Minnesota (where he had served on the Board of Regents) made him a controversial Supreme Court nominee when proposed by Republican President Warren Harding. Senator-elect Henrik Shipstead of his home state opposed him, as did Progressive Senator Robert M. LaFollette, Sr. of Wisconsin. Also against his confirmation were labor activists, some liberal newspapers (the New Republic and The Nation), and the Ku Klux Klan. However, with the support of prominent Roman Catholics, fellow lawyers (the Minnesota State Bar Association strongly endorsed him), and business groups (especially railroad companies), as well as Minnesota's other senator, Knute Nelson, he was confirmed by a wide margin of 61 to 8. The Senators who voted against him were five Democrats (Walter F. George, William J. Harris, J. Thomas Heflin, Morris Sheppard, and Park Trammell) and three Republicans (Robert M. LaFollette, Sr. Peter Norbeck, and George W. Norris). He took his seat on the Court on January 2, 1923.
While on the Court, Butler vigorously opposed regulation of business and the handing out of welfare by the government. He voted against many of fellow Democrat Franklin Roosevelt's "New Deal" laws that came before the Court, earning him a place among the so-called "Four Horsemen," which also included James Clark McReynolds, George Sutherland, and Willis Van Devanter. He wrote the majority (6-3) opinion in United States v. Schwimmer, where the Hungarian immigrant's application for citizenship was denied. In Palko v. Connecticut, he was the lone dissenter on the court; the rest of the justices believed that a state was not restrained from trying a man a second time for the same crime. Butler believed this violated the Fourteenth Amendment to the United States Constitution. In Buck v. Bell, Butler was the only Justice who dissented from Justice Oliver Wendell Holmes, Jr.'s opinion holding that the forced sterilization of an allegedly "feeble-minded" woman in Virginia was constitutional. Although Butler dissented in both Buck and Palko, he did not write a dissenting opinion in either case; the practice of a Justice's noting a dissent without opinion was much more common then than it would be in the late twentieth and early twenty-first centuries.