Alan Pardew checked out the player several times last season, and said in May he had the out-of-contract midfielder on his radar.
But the 22-year-old signed a four-year deal with the Canaries on July 3 although a fee - required as Butterfield is under the age of 24 and had been offered fresh terms - could not be settled between the two clubs, making a tribunal almost inevitable.
Barnsley rejected an initial offer as derisory, but a statement from the Tykes on Friday morning revealed Norwich have upped their offer and common ground has been found.