The 20-year-old signed for Tony Pulis' side in January before being loaned back to Birmingham for the rest of the season, and he says that at this stage in his career he is looking to develop his skills and did not feel he would get enough games to do that with Chelsea or the Premier League champions.
"I had the chance to speak to Chelsea but I didn't feel like I needed to," Butland told The Times. "It's a fantastic club and it would be a great honor to play for them at some stage, but I've got a chance to join a club where I feel I can better develop my game and take it to the next level, which I didn't feel at some of the other clubs I rejected.
"I turned Manchester City down about a year ago. Again, I was flattered, but Joe Hart is their undisputed No. 1 and he was a main factor."
Birmingham sits 14th in the League Championship table and kept just six clean sheets in 37 games this season.