Paul Vaughn Butterfield was born December 17, 1942, in Chicago's Hyde Park neighborhood, the son of a lawyer father and a painter mother. He attended the University of Chicago Laboratory Schools and studied classical flute there under Walfrid Kujala of the Chicago Symphony Orchestra; a knee injury cost him a track scholarship to Brown University and redirected him toward music full time. By the late 1950s he had traded flute for blues harmonica, working Chicago's South and West Side clubs alongside guitarist Nick Gravenites and coming up under the informal patronage of Muddy Waters, Howlin' Wolf, Little Walter, and Otis Rush, who let the young white players sit in. He partnered with guitarist Elvin Bishop in the early 1960s, and by 1963 the two had landed a standing gig at Big John's, a folk club in Old Town, recruiting bassist Jerome Arnold and drummer Sam Lay, both alumni of Howlin' Wolf's band, to complete the core group.

Producer Paul Rothchild caught the band at Big John's and signed it to Elektra Records; during the sessions he brought in guitarist Mike Bloomfield, whom he had also seen working the same rooms, and the Paul Butterfield Blues Band's classic lineup was set. Their self-titled 1965 debut announced a bracingly authentic Chicago blues band fronted by a white harmonica player, and that July the group's set at the Newport Folk Festival was strong enough that Bob Dylan hired three of them, including Bloomfield, to back his first electric performance the next night. The band's second album, East-West (recorded July 1966 at Chess Studios in Chicago, released that August on Elektra), pushed further: its 13-minute modal title track, built on a drone bass pattern and shifting through a series of moods and keys, grew out of Bloomfield's fascination with John Coltrane's raga-influenced improvising and Miles Davis's modal writing, and stands as one of the earliest fusions of Chicago electric blues with jazz-derived modal improvisation and Indian classical structure. It is the record most responsible for the band's reputation as a bridge between blues, rock, and jazz.

Bloomfield left in 1967 to form the Electric Flag, and Butterfield rebuilt the band around a horn section, adding saxophonists David Sanborn and Gene Dinwiddie, trumpeter Keith Johnson, drummer Phillip Wilson, and bassist Bugsy Maugh. That expanded group cut The Resurrection of Pigboy Crabshaw (1967), the band's commercial peak at number 52 on the Billboard chart, and played the Monterey Pop Festival on June 17, 1967. In My Own Dream (1968) and Keep On Moving (1969) leaned further into horn-driven soul and R&B, with Elvin Bishop and keyboardist Mark Naftalin exiting along the way; a 1970 live double album, recorded at the Troubadour in West Hollywood, documented the horn-band edition at full strength before Sometimes I Just Feel Like Smilin' (1971) closed out the group's run. In between, Butterfield took part in one of his most celebrated sideman dates: an April 1969 session organized by producer Norman Dayron reuniting Muddy Waters with Otis Spann, Bloomfield, Sam Lay, Donald "Duck" Dunn, and Buddy Miles, released as Fathers and Sons (Chess, 1969). Waters himself said it was as close as he'd gotten to his original feel since first cutting the songs.

After the Blues Band broke up in 1971, Butterfield settled in Woodstock, New York, and formed Paul Butterfield's Better Days with guitarist Amos Garrett, singer-guitarist Geoff Muldaur, pianist Ronnie Barron, bassist Billy Rich, and drummer Chris Parker. Better Days recorded two albums for Albert Grossman's Bearsville label, Paul Butterfield's Better Days (1973) and It All Comes Back (1973), trading the horn-band sound for a looser, roots- and folk-inflected blues that let each member's outside influences show; a 1973 Winterland Ballroom performance was later released as Live at Winterland Ballroom (1999). After Better Days dissolved, Butterfield worked increasingly as a Woodstock-scene sideman and occasional soloist: he rejoined Muddy Waters for The Muddy Waters Woodstock Album (Chess, 1975), cut at Levon Helm's Woodstock studio with Garth Hudson and Waters's touring band; appeared at The Band's farewell concert, "The Last Waltz," on November 25, 1976, backing the group on "Mystery Train" and Muddy Waters on "Mannish Boy"; and toured and recorded with Levon Helm and the RCO All-Stars (1977) and with the Band's Rick Danko. His solo studio albums from this period were Put It in Your Ear (Bearsville, 1975), featuring Levon Helm, Garth Hudson, and David Sanborn again alongside guitarist Eric Gale, and North South (Bearsville, 1980), a more produced record built around strings and funk arrangements that departed from his blues-band sound.

Butterfield's final years were shadowed by illness. Beginning around 1980 he underwent repeated surgeries for peritonitis, and he developed a heroin addiction that friends and biographers tied to managing chronic pain, compounded by financial strain and grief over Bloomfield's 1981 death and manager Albert Grossman's 1986 death. He attempted a comeback with The Legendary Paul Butterfield Rides Again (Amherst Records, 1986) and performed at a B.B. King all-star concert in April 1987 alongside Eric Clapton, Albert King, Etta James, and Stevie Ray Vaughan. He was found dead in his North Hollywood apartment on May 4, 1987, at age 44; a coroner's autopsy attributed the death to an accidental overdose combining morphine (heroin), codeine, and the tranquilizer Librium, against a backdrop of long-term peritonitis and heavy drinking. He was inducted into the Blues Hall of Fame in 2006, and the classic Paul Butterfield Blues Band lineup entered the Rock and Roll Hall of Fame in 2015. The 2017 documentary Horn from the Heart: The Paul Butterfield Story revisited his career to strong reviews on its 2018 theatrical release.

Butterfield treated the harmonica the way Chicago's Black harp players did, as a horn: favoring single-note lines over chords, bending pitches hard, and building long, sustained solos rather than short fills, with a tone critics consistently described as intense, concise, and unusually pure. AllMusic's Steve Huey credited him with breaking a pattern in which white American musicians approached the blues "with cautious respect, afraid of coming off as inauthentic," arguing that Butterfield's "storming sound was a major catalyst in bringing electric Chicago blues to white audiences" and cleared a path for bands like Cream, whose induction by the Blues Foundation cited exactly that lineage. Bandmate Mike Bloomfield's absorption of John Coltrane's modal and raga-based improvising, channeled through the Butterfield band's 1966 recording of "East-West," gave the group a genuine claim on jazz-fusion territory years before "fusion" was a marketing term, and the band's later horn-section incarnation, with David Sanborn and Gene Dinwiddie on saxophones, pushed it further toward a big-band, R&B-and-jazz hybrid sound. Butterfield played Hohner Marine Band diatonic harmonicas, worked primarily in cross-harp (second position), and, reportedly left-handed, held the harp in his right hand while using his left for cupping and muting effects; he later documented his technique in the instructional book and CD Paul Butterfield Teaches Blues Harmonica Master Class (1997).