Peterborough director of football Barry Fry expects the left-back to sign a new contract with the Championship club by the end of the week.
While Fry has also dismissed speculation that the London Road club are keen on snapping up Pompey pair Craig MacGillivray and John Marquis.
The left-back was released in the summer of 2015 and dropped into non-league with Torquay to rebuild his career.
Since then it has been a stunning turnaround from the 26-year-old, who has shone at Newport County and now Peterborough, where he won promotion this season.
And Fry insists the Championship newcomers are now in the process of securing Butler’s future through a new deal.
He told the Peterborough Telegraph: ‘Neither or those players (MacGillivray and Marquis) are on the list of targets given to me.
‘And Pompey haven’t contacted me about Dan Butler either. Dan wouldn’t leave anyway. We’ve verbally agreed a new contract and he’s coming to see me before the end of the week.’
Meanwhile, former Pompey right-back Nathan Thompson is also in talks over a new Peterborough deal.
The 30-year-old has made 62 appearances for the Posh since joining on a free transfer in August 2019, after electing to leave Fratton Park under Kenny Jackett.
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