Butler was born in Indiana to Bruce and Sharon Butler. His father, a United States Air Force pilot, was killed in an airplane crash when Butler was six years old, but the elder Butler had already instilled a love of all things mechanical in his son. By his mid-teens, Butler had dismantled and rebuilt the family car and was regarded as a neighborhood motor enthusiast.
He studied flight technology at Vincennes University, earning a commercial pilot license and winning the school's Top Aerobatic Pilot award, before leaving early to pursue professional motorcycle racing. Butler won the AMA District 15 Indiana Half-Mile Flat Track Championship in 1976, but a serious injury in his first professional season — a crash at Onekama, Michigan that hospitalized him for thirty days — foreshadowed a pattern of physical setbacks that punctuated his early career. By 1979 he was racing a Harley-Davidson XR-750 on the professional flat track circuit until costs forced him out, and he turned his attention to sprint cars.
Butler's transition to sprint car racing was financed on virtually no resources. He sold his race bikes and transport van, convinced his future wife Thomasa to use her home as collateral for a loan, and spent the winter of 1980–81 rebuilding a worn-out sprint car by hand in his mother's garage. When the 1981 season opened he had no street transportation of his own, yet won his very first heat race. An engine sponsorship from local shop owner Ezra Beachy, followed by a tire-and-fuel partnership with supermarket owner Bud Whitacre, gave the team the stability to compete fully.
Butler's first USAC appearance in 1982 was dramatic: he set a new track record at Bloomington, Indiana on his opening qualifying lap, then flipped out of the track on the second. He returned in 1983 to post top-three finishes in half of six USAC races while winning the Paragon Speedway track championship.
His championship run began in earnest in 1984. Driving from tenth on the grid at Eldora Speedway's Jud Larson/Don Branson Memorial — broadcast live on ABC's Wide World of Sports — Butler took the lead on lap 16 from Jack Hewitt to claim his first USAC win. He won five races that season and finished third in the championship standings.
By 1986 he had partnered with car owner Phil Poor and the team's unassuming machine, nicknamed "Ol' Whitey," became a championship weapon. Butler won the USAC Sprint Car title that year and repeated in 1987 to become a back-to-back champion, earning the Hoosier Auto Racing Fan Driver of the Year award. In 1988 he became the first driver to win three consecutive USAC Sprint Car championships and also demonstrated exceptional versatility by winning races on pavement, dirt without wings, and dirt with wings all in the same season — a combination no other driver had achieved in a single USAC campaign. That same year he won his first USAC Silver Crown title, serving simultaneously as the car's chief mechanic.
In 1989, Butler made a serious bid for the Indianapolis 500, posting the fastest speed in mandatory rookie orientation testing at 214.246 mph before a heavy crash destroyed the car and broke his right shoulder. He returned mid-season to sprint car racing and broke his left shoulder in a separate accident in August, yet missed only one race weekend. In 1990, Butler secured his fourth USAC Sprint Car championship — at the time, a record for the 34-year-old series — and in 1992 won a second Silver Crown title in a final-lap showdown at Eldora Speedway, entering the race's final event as a mathematical long shot behind points leader Jeff Swindell and winning both the race and the title.
Butler was noted for his ability to serve as chief mechanic on several of his championship-winning cars, a rare dual role at the national level. During a 1993 Silver Crown race at Indianapolis, with his engine misfiring from a faulty ignition switch, he diagnosed and repaired the fault mid-race while driving with one hand, tying off the exposed wire around a hydraulic hose and going on to win the event by ten seconds over Ron Shuman.
He wrote regularly for Open Wheel Magazine during his racing career and was invited by Motor Trend to serve as a full-time technical editor, an offer he declined to remain in Indiana. Butler worked as an on-camera commentator for ESPN broadcasts of USAC races from 1988 to 1996.
Butler retired from racing at the age of 37 to pursue a career at Delphi Automotive Systems. Without a formal technical degree, he advanced through engineering by application of skills developed as a racer, becoming a senior systems engineer and receiving a $20,000 bonus for electrical diagnostic procedures he developed. His project work included lead engineer roles on prototype fly-by-wire throttle control for motorcycles and an electronic data monitoring system for United States Marine Corps LAV-25 armored vehicles.
Butler was inducted into the Hoosier Auto Racing Fan's Hall of Fame in 1993, the National Sprint Car Hall of Fame in 2005 — alongside Steve Kinser — and the USAC Hall of Fame in 2016. In 2018, the Indianapolis Motor Speedway Museum featured his career in the Hoosier Thunder exhibit alongside Jeff Gordon, Tony Stewart, Steve Kinser, and other open-wheel champions. His six USAC national championships across Sprint Car and Silver Crown divisions place him among the most decorated drivers in the club's history.