Butler was New England's second-round pick in 2009 and has made 14 NFL starts. In 42 career games, Butler, a 5-foot-10, 185-pound Connecticut alum, has recorded 89 career tackles, picked off three passes -- all last season with Carolina -- and forced one fumble.
He was waived by the Patriots last September and was claimed by the Panthers the next day. Carolina waived him Aug. 31.
Butler adds depth and experience to a young secondary that has already struggled this season and could help fill the void of injured cornerback Vontae Davis (ankle).
To make room, the Colts (1-2) released Essex, who played in each of Indy's last two games.
Indy has a bye this week.