Butler was born on December 4, 1835, at Langar Rectory near Bingham, Nottinghamshire, England. He was both the son and grandson of Anglican clergy. He received his education at Shrewsbury School and St. John's College, Cambridge, where he earned a degree in 1858.

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Although Samuel and his family had made plans for him to enter the ministry, he began to have doubts about his religion and ordination. After Cambridge, he worked briefly among the poor in London as a lay minister while trying to decide his future. In 1860, he emigrated to New Zealand and became a successful sheep rancher while publishing articles in the local press. Four years later, he returned to England, where he studied to become a painter and continued his writing.

Much of Butler's work concerns his two primary interests, religion and evolution. He was particularly intrigued by the writings of Charles Darwin, an interest reflected in the extremely successful Erewhon (1872), a utopian vision of the future and parody of Victorian England, as well as in The Fairhaven (1875), a satire on Christianity and rationalism.

Butler completed many other essays, nonfiction works, and another novel Erewhon Revisited (1901), but it was his autobiographical novel, The Way of All Flesh (published posthumously in 1903), that most fully revealed Butler's moral beliefs while blasting the image of the Victorian family, religion, and society.

Butler's life and writings are strongly male-identified with intense overtones. He was a lifelong bachelor who had several intense relationships with men, especially with Charles Paine Pauli. They met in New Zealand in 1861 and returned to England together in 1864. Butler supported Pauli financially for the next thirty years, only to learn on Pauli's death that he had amassed a fortune, excluded Butler from his will, and had been supported by two other men during the years of Butler's support.

Henry Festing Jones, Butler's companion and biographer, also recalls the writer's love for another young man, the Swiss Hans Faesch, whose early death prompted Butler's emotional poem, "In Memoriam H.R.F." (1895), and his wearing a lock of Faesch's hair in a pendant. Although some critics have suggested that this friendship indicated Butler's intense longing for a son, Jones notes that the poem's publication caused Butler to be concerned that he might be regarded as another Oscar Wilde, whose trials caused a wave of antihomosexual feeling in English society in 1895 and afterward.

Butler's predilection for intense male friendships is expressed through the characters of Ernest Pontifex, Towneley, Pryor, and Overton in The Way of All Flesh. Throughout the novel, Ernest Pontifex struggles against his feelings for other men. After his ordination, he encounters the curate Pryor, and realizes that he is not alone in his sentiments.

Determined to marry in the hopes that marriage will alleviate the problem, his marriage turns out to be a fraud, much to his relief. The character of Overton, who represents Butler as an older man, repeatedly mentions his dislike of women, marriage, and the dissolution of male friendship because of marriage. The Way of All Flesh was to have a profound influence on E. M. Forster, whose The Longest Journey (1907) expresses some of the same sentiments regarding marriage.

Butler's other writings include The Authoress of the Odyssey (1897), in which he posits the idea that the Odyssey was written by a woman; and Shakespeare's Sonnets Reconsidered (1899), which contends that Shakespeare had become infatuated with a younger man who duped and betrayed him, a thesis that parallels his own sad relationship with Pauli.

Butler died in 1902 after a prolonged illness, attended by his devoted manservant, Alfred Catie, and his companion, Henry Festing Jones.

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