Butterworth was born in Paddington, London. Soon after his birth, his family moved to Yorkshire so that his father Sir Alexander Kaye Butterworth could take up an appointment as general manager of the North-East Railway Company, based at York. George received his first music lessons from his mother, who was a singer, and he began composing at an early age. As a young boy, he played the organ for services in the chapel of his prep school, Aysgarth School, before gaining a scholarship to Eton College. He showed early musical promise at Eton, a 'Barcarolle" for orchestra being played during his time there (it is long since lost). He then went to Trinity College, Oxford, where he became more focused on music, becoming President of the university musical society. He also made friends with folk song collector Cecil Sharp; the composer and folk song enthusiast Ralph Vaughan Williams; the future Director of the Royal College of Music, Hugh Allen; and a baritone singer and future conductor, Adrian Boult. Butterworth and Vaughan Williams made several trips into the English countryside to collect folk songs (Butterworth collected over 450 himself, many in Sussex in 1907, and sometimes using a phonograph) and the compositions of both were strongly influenced by what they collected. Butterworth was also an expert folk dancer, being particularly keen in the art of morris dancing. In fact, he was employed for a while by the English Folk Dance and Song Society (of which he was a founder member in 1906) as a professional morris dancer, a member of the Demonstration Team.
Upon leaving Oxford, Butterworth began a career in music, writing criticism for The Times, composing, and teaching at Radley College, Oxfordshire. He also briefly studied piano and organ at the Royal College of Music where he worked with Hubert Parry among others, though he stayed less than a year as the academic life was not for him.
Vaughan Williams and Butterworth became close friends. It was Butterworth who suggested to Vaughan Williams that he turn a symphonic poem he was working on into his London Symphony.