The 19-year-old shot-stopper had been linked with moves to Chelsea, Manchester City and Fulham but opted to link up with Tony Pulis at the Britannia Stadium.
Butland represented the Great Britain Olympic football team in the summer, before making his debut for Roy Hodgson's Three Lions against Italy, making him England's youngest ever goalkeeper.
He has signed a four-and-a-half-year deal at the Britannia Stadium, but will remain at St Andrews on loan for the rest of the season.
Meanwhile, the Potters have allowed defender Matt Upson to join Brighton for the rest of the season.
The former England international signed for Stoke in the summer of 2011 and will stay at the Amex Stadium for any potential playoff clashes.