Minogue recorded her vocals at Cello Studios, Los Angeles in January 2000 with American DJ Mark Picchiotti, who subsequently produced the track in Chicago.

Music critics picked "Butterfly" as an instant standout from the parent album, praising its catchy melody and potential for a hit single.

Following the commercial disappointment of Impossible Princess (1997), Minogue ended her six-year relationship with Deconstruction Records and signed with Parlophone in June 1999.

[3] Before signing with Parlophone, Minogue spent a week with her frequent collaborator Steve Anderson at Real World Studios in Box, Wiltshire, where most of the production of Impossible Princess was completed.

[13] When Picchiotti submitted the complete song, which includes sitars and strings arrangement, he was encouraged by the label to change the production to a more club-friendly sound.

"[17] Picchiotti instructed Minogue's vocals in order to fit the cheerful theme; she can be heard singing harmonies in a light tone of voice in the background.

[22] Picchiotti produced the Sandstorm Mix, while also picking other remixes and dubs for the single release, including the work by English dance music production group Dillon & Dickins (credited as Illicit) and fellow American DJ E-Smoove.

[30] Due to its popularity, "Butterfly" was included as a bonus track on the US edition of Minogue's eighth studio album Fever (2002), distributed by Capitol Records.

[32] Michael Dwyer of The Age found Minogue gives a "hardcore Mardi Gras" performance, while Mike Wass of Idolator praised the fluttery and memorable sound.

[35] Sal Cinquemani of Slant Magazine stated house tracks "On a Night Like This" and "Butterfly" predicted the rise of EDM music and created the template for Minogue's releases over the next 15 years.

"[35] Muri Assunção of Billboard praised the sensual and entertaining performance, calling it a tribute to "the gay leather fetish fans;" while Mike Gee of The Sydney Morning Herald highlighted it as an energetic and "ass-shaking fun" segment.