He was born at the rectory in the village of Langar, near Bingham, Nottinghamshire, England, to the Rev. Thomas Butler, son of Dr. Samuel Butler, headmaster of Shrewsbury School and eventual Bishop of Lichfield. Dr. Butler was the son of a tradesman and descended from a line of yeomen, but his scholarly aptitude being recognized at young age was sent to Rugby and Cambridge, where he distinguished himself and launched his successful career. His only son Thomas wished to go into the Navy, but succumbed to paternal pressure and entered the Church, in which he led a wholly undistinguished career, all the more so in contrast with his father's. It has been suggested that this family dynamic had some impact on Samuel, insofar as it created the oppressive home environment (chronicled in The Way of All Flesh) which deeply formed his approach to the world. Thomas Butler, states one critic, "to make up for having been a servile son, became a bullying father."

In any event, Samuel Butler's relationship with his parents, and especially with his father, was largely antagonistic. His education began at home, and it included frequent beatings, as was not uncommon at the time. Samuel, however, found his parents particularly "brutal and stupid by nature," and their relationship to him never progressed beyond the adversarial. He later recorded of his father that, "He never liked me, nor I him; from my earliest recollections I can call to mind no time when I did not fear him and dislike him…. I have never passed a day without thinking of him many times over as the man who was sure to be against me." Under his parents' influence, he was set on course to follow his father into the priesthood. He was sent to Shrewsbury and then in 1854 went up to St John's College, Cambridge, where he obtained a First in Classics in 1858 (the graduate society of St John's is named the Samuel Butler Room (SBR) in his honor).

Following graduation from Cambridge, he lived in a low income parish in London during 1858 and 1859 as preparation for his ordination to the Anglican clergy; there he discovered that baptism made no apparent difference to the morals and behavior of his peers and began questioning his faith. This experience would later serve as inspiration for his work The Fair Haven. Correspondence with his father about the issue failed to set his mind at peace, inciting instead his father's wrath. As a result, in September 1859 he emigrated to New Zealand on the ship Roman Emperor, regarded as a British colony since the Treaty of Waitangi between the British Crown and many of the New Zealand Maori chiefs in 1840. Butler went there like many early British settlers of privileged origins, in order to put as much distance as possible between himself and his family. He wrote about his arrival and his life as a sheep farmer on Mesopotamia Station in A First Year in Canterbury Settlement (1863), and made a handsome profit when he sold his farm, but the chief achievement of his time in New Zealand was the drafts and source material for much of his masterpiece Erewhon.

He returned to England in 1864, settling in rooms in Clifford's Inn (near Fleet Street), where he lived for the rest of his life. In 1872, the utopian novel Erewhon appeared anonymously, causing some speculation as to the identity of the author. When Butler revealed himself as the author, Erewhon made Butler a well known figure, more because of this speculation than for its literary merits which are today undisputed.

His father's death in 1886 resolved his financial problems for the last six years of his own life. He indulged himself, holidaying in Italy every summer and producing while he was there his works on the Italian landscape and art. His close interest in the art of the Sacri Monti is reflected in Alps and Sanctuaries of Piedmont and the Canton Ticino (1881) and Ex Voto (1888).

He wrote a number of other books, including a not so successful sequel, Erewhon Revisited. His semi-autobiographical novel The Way of All Flesh did not appear in print until after his death, as he considered its tone of attack on Victorian hypocrisy too contentious.

Erewhon revealed Butler's long interest in Darwin's theories of biological evolution. In 1863, four years after Darwin published On the Origin of Species, the editor of a New Zealand newspaper, The Press, published a letter captioned "Darwin among the Machines." Signed Cellarius, it was written by Butler; it compares human evolution to machine evolution, prophesizing (half in jest) that machines would eventually replace man in the supremacy of the earth: "In the course of ages we shall find ourselves the inferior race." The letter raises many of the themes now being debated by proponents of the Technological Singularity, namely, that computers are evolving much faster than biological humans and that we are racing toward an unknowable future with explosive technological change.

Butler also spent a great deal of time criticizing Darwin, and this criticism was motivated partly because Butler (himself a man living in the shadow of a previous Samuel Butler) believed that Darwin had not sufficiently acknowledged his grandfather Erasmus Darwin's contribution to the origins of his theory.

George Bernard Shaw and E.M. Forster were great admirers of the latter Samuel Butler, who brought a new tone into Victorian literature and began the long tradition of New Zealand utopian / dystopian literature that would culminate in works by Jack Ross (writer), William Direen and Scott Hamilton.

Butler developed a theory that the Odyssey came from the pen of a young Sicilian woman, and that the scenes of the poem reflected the coast of Sicily and its nearby islands. He described the "evidence" for this theory in his The Authoress of the Odyssey (1897) and in the introduction and footnotes to his prose translation of the Odyssey (1900). Robert Graves elaborated on this hypothesis in his novel Homer's Daughter. In a lecture titled "The Humour of Homer", delivered at The Working Men's College in London, 1892, Butler argued that Homer's gods in the Iliad are like men but "without the virtue" and that the poet "must have desired his listeners not to take them seriously." Butler translated the Iliad (1898). His other works include Shakespeare's Sonnets Reconsidered (1899), a theory that Shakespeare's sonnets, if rearranged, tell a story about a homosexual affair.

The English novelist Aldous Huxley acknowledged the influence of Erewhon on his novel Brave New World. Huxley's utopian counterpart to Brave New World, Island, also prominently refers to Erewhon.

Butler belonged to no school, and spawned no followers during his lifetime. A serious but amateur student of the subjects he undertook, especially religious orthodoxy and evolutionary thought, his controversial assertions effectively shut him out from both of the opposing factions of Church and science which played such a large role in late Victorian cultural life: “In those days one was either a religionist or a Darwinian, but he was neither.” His influence on literature, such as it was, came through The Way of All Flesh, which Butler completed in the 1880s but left unpublished in order to protect his family. And yet the novel, “begun in 1870 and not touched after 1885, was so modern when it was published in 1903, that it may be said to have started a new school,” particularly in the use of psychoanalytical modes of thought in fiction, which "his treatment of Ernest Pontifex [the hero of Butler's novel] foreshadows."

Whether in his satire and fiction, his studies on the evidences of Christianity, his works on evolutionary thought or in his miscellaneous other writings, however, a consistent theme runs through Butler's work, stemming largely from his personal struggle with the stifling of his own nature by his parents, which led him on to seek more general principles of growth, development and purpose: "What concerned him was to establish his nature, his aspirations and their fulfillment upon a philosophic basis, to identify them with the nature, the aspirations, the fulfillment of all humanity – and more than that – with the fulfillment of the universe . . . His struggle became generalized, symbolic, tremendous." The form that this search took was principally philosophic and – given the interests of the day – biological: “Satirist, novelist, artist and critic that he was, he was primarily a philosopher,” and in particular a philosopher who sought the biological foundations for his work: “His biology was a bridge to a philosophy of life which sought a scientific basis for religion and endowed a naturalistically conceived universe with a soul.” Indeed, "philosophical writer" was ultimately the self description Butler himself chose as most fitting to his work.

Butler's friend Henry Festing Jones wrote the authoritative biography: the two volume Samuel Butler, Author of Erewhon (1835 - 1902): A Memoir (commonly known as Jones's Memoir), published in 1919 and now only available from antiquarian booksellers. Project Gutenberg hosts a shorter "Sketch" by Jones. More recently, Peter Raby has written a life: Samuel Butler: A Biography (1991). The Way of All Flesh was published after Butler's death by his literary executor, R. Streatfeild, in 1903. This version however altered Butler's text in many ways and cut important material. The actual manuscript was edited by Daniel F. Howard as Ernest Pontifex, or The Way of All Flesh (Butler's original title) and published for the first time in 1965.