The 31-year-old joins in time to make his debut for the Outlaws in Friday's tournament-opener against Leicestershire Foxes.
Butler is currently with the touring New Zealand squad contesting a two-match Twenty20 series against England.
"The Notts Outlaws squad looks very strong and I feel well prepared having played two Twenty20 internationals this week," said Butler.
"There is a great tradition of New Zealand cricketers doing well with Nottinghamshire and I am really looking forward to playing at Trent Bridge."
Nottinghamshire director of cricket Mick Newell added: "We knew that several New Zealanders were keen to have a stint in county cricket and Ian was our pick because we needed a bowler with pace and aggression."
Butler has played eight Tests, 26 ODIs and 18 T20 internationals for New Zealand since his debut in 2002, taking 75 wickets in all formats.
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