Butt, who turned 34 last month, joined Newcastle in 2004. He spent the 2005/06 season on loan at Birmingham but has since established himself as one of the mainstays of the Magpies side.
Goalkeeper Steve Harper and striker Shola Ameobi have also recently signed new deals at Newcastle while Danish winger Peter Lovenkrands, midfielder Kevin Nolan and defender Ryan Taylor were all recruited during the transfer window that closed on Monday evening.
French midfielder Charles N'Zogbia and first-choice goalkeeper Shay Given both left the club with N'Zogbia joining Wigan in a deal that resulted in Taylor moving in the opposite direction and Given heading for Manchester City.
Those deals netted Newcastle around £12 million. Only one third of that money was reinvested with Nolan's capture from Bolton costing the club £4 million.