Walter Butler practiced law in Albany, New York. When the War of Independence began, he joined the British King's 8th Regiment as an ensign. He first saw action at the Battle of Oriskany with a group of British army volunteers led by Sir John Johnson. Walter's father, Colonel John Butler, formed a regiment in support of the British cause - the regiment became known as Butler's Rangers. Walter asked for and was granted a transfer to his father's unit with a captain's commission.

Butler soon went on a recruiting expedition behind enemy lines. He was caught and sentenced to death for spying. General Benedict Arnold, once a friend of his father's, got his sentence reduced to imprisonment. Walter spent several months in an Albany jail before escaping to Canada.

In November 1778, Butler returned to the United States. He led a combined Iroquois and Ranger force against an army of American revolutionaries at Fort Alden in Cherry Valley. During the assault, some of the warriors in his party killed civilian residents. Historians have generally blamed Butler for failing to prevent the incident. The attack became known as the Cherry Valley Massacre.

Butler went on to lead several raids in the American-held Mohawk Valley. An Oneida warrior killed him as he was fleeing the Battle of Johnstown, the last major battle of the American Revolution.