Butler made no mistake with a neat close-range finish in the 69th minute as Wolves' record of five successive league victories came to a shuddering halt.
Dean Smith's Walsall side had lost on penalties to Wolves at Molineux in the Johnstone's Paint Trophy two weeks ago to make their league success all the sweeter.
Having ended a run of five league and cup games without a win by beating Crewe 3-0 last weekend, Butler earned Walsall their second successive league success when he converted a knock down from James Baxendale following Andy Taylor's left-wing free kick.
The margin of their success could have been greater as Milan Lalkovic hit the post in stoppage time.
Walsall, who had already hit the bar through a Craig Westcarr free-kick in the ninth minute, had earlier been indebted to goalkeeper Richard O'Donnell for keeping them on level terms before Butler's strike.
It needed a wonder save from O'Donnell to turn Bakary Sako's 30-yard free-kick over the bar six minutes before the interval.
O'Donnell then came to Walsall's rescue again on the stroke of half-time when he pushed out Kevin Doyle's header from Sako's corner as Wolves crashed to their first league defeat of the season - and lost their 100% home record in the process.