Butterworth was a central defender who started his career at Coventry City then joined Nottingham Forest as part of a deal that also took future England international Stuart Pearce to Forest from Coventry. In September 1986 he joined Norwich City on loan before signing for the club permanently for a fee of £160,000 the following month.
He was a regular for 8 years at Norwich in the centre of defence until knee injuries forced him to retire. He played for the Canaries during what was arguably the finest part of their history so far. He helped them finish fifth in the league in his first season (a year after promotion), finish fourth and reach the FA Cup semi-finals in 1989, reach another FA Cup semi-final in 1992, finished a club best third in the new FA Premier League in 1993 and eliminate Bayern Munich from the UEFA Cup in his final season.
An attempt to resurrect his career at King's Lynn failed and Ian moved to the USA to play for the Colorado Rapids.
Butterworth restarted his career in Sweden with IK Brage (11 apps 0 goals) and in September 1997 he became Player Manager but wanted to return home and joined Stafford Rangers as a player. In the early part of 1998 He joined Cobh Ramblers as Player Manager.
In May 1998 he joined Darlington as assistant manager but resigned on 2 July 2000. In October 2000 he joined Cardiff as assistant he was there to 2004 until Sam Hammam sacked him.
He had a stint as coach at Bristol Rovers and the FA before joining Hartlepool United as reserve team manager.
In 2004, Norwich supporters voted Butterworth into the club's Hall of Fame.
In February 2009, Butterworth was appointed Assistant Manager at Norwich City, working alongside new manager Bryan Gunn, a former team-mate. He was made caretaker manager after Gunn's sacking in August, but he resigned on 19 August shortly after the appointment of new manager Paul Lambert.