Richard Butler was born on April 1, 1743 in the parish of St. Bridget's, Dublin, Ireland, the son of Thomas and Eleanor (Parker) Butler. Thomas Butler was an Irish aristocrat who served in the British army. He was the brother of Colonel Thomas Butler and Captain Edward Butler. All three brothers served in the American Revolution and in the Northwest Indian War against the Western Confederacy of Native American tribes in the Northwest Territories. His two other brothers, William and Percival, served in the Revolution but did not see later military service.
His father later came to America and settled in Lancaster, Pennsylvania. Richard served as an ensign with the Bouquet expedition of 1764, after which he and his brother William ventured a partnership as Indian traders at Chillicothe, Ohio, and at Pittsburgh.