The team announced Tuesday afternoon that Butler suffered a ruptured right patellar tendon that was operated on by team physician Dr. T.O. Souryal at Texas Sports Medicine.
Butler injured the knee early in Saturday's game at Milwaukee. On Sunday a source said that the initial diagnosis was that Butler had at least a partial tear of the patellar tendon. The best-case scenario was that the Mavs' starting small forward would miss a couple of months. The ruptured tendon meant the end of Butler's second season in Dallas.
"We're a team of good individual players, but we're a team first," coach Rick Carlisle said. "We've got to pick up the slack as a group. The challenge for us is to get better defensively, that will trigger a lot of good things for us."
Carlisle said Butler's surgery "went extremely well, from what I heard." He said he's exchanged text messages with Butler.
"He's in unbelievably great, positive spirits," Carlisle said.
Carlisle also said forward Dirk Nowitzki would miss his fifth straight game with a sprained right knee. Nowitzki is day to day.
Earlier Tuesday morning, Butler used his Twitter feed to post a picture of himself in a hospital bed and wearing a hospital gown and cap with a caption that read: "Going in." Even so, the Mavs were remaining mum on Butler's status.
"Championship!" Butler said via Twitter from the hospital prior to the surgery. "Remember that fans that's what its about and we have what it take in that lockeroom to get it done, ill be 100 percent" ... "In no time, and I will be the biggest supporter on the sideline until healthy thanks for the support again I'm going in ..."
Butler was the Mavs' third-leading scorer, averaging 15.0 points a game, and close to overtaking Jason Terry for second behind Nowitzki. Over the past seven games, Butler was on a tear, averaging nearly 20 points a game, and he had significantly raised his shooting percentage from the field as well as from beyond the 3-point arc.
Shawn Marion started in Butler's place in Sunday's win at Cleveland and scored a team-high 22 points to help snap a three-game losing skid. The veteran is the likely replacement moving forward.
Complicating efforts to replace him, Butler's injury occurred too late for the Mavericks to apply for the same disabled player exception Portland and Miami received recently for season-ending injuries suffered by Greg Oden and Udonis Haslem, respectively.
It was initially believed that the Mavericks could apply for an injury exception worth $5.28 million -- half of Butler's $10.6 million salary -- to sign or trade for one player within 45 days.
But because Butler's injury occurred after Nov. 30, league rules stipulate that Dallas would be eligible to receive an injury exception only if Butler was deemed by an independent doctor to be unable to play next season as well as this season.
Butler, of course, isn't even under contract with the Mavericks for next season. He becomes a free agent July 1.
Jeff Caplan covers the Mavericks for ESPNDallas.com. You can follow him on Twitter. Marc Stein of ESPN.com, Tim MacMahon of ESPNDallas.com and The Associated Press contributed to this report.