The 28-year-old is moving to familiar surroundings as he has already made over 100 appearances during two spells with the Imps.
He finished as the Magpies' top scorer in the 2007/08 season and will be hoping to add to his 12 Lincoln goals.
Peter Jackson beat off stiff competition to sign Butcher, who is already a fans' favourite at Sincil Bank. He left them for Oldham in June 2005 but was back just four months later on a one-month loan deal.
Delighted Jackson said: "He has scored 10 goals and 12 goals in his last two seasons which is not a bad return for the amount of games he has played.
"Since the departure of [Lee] Frecklington, I felt we missed that goalscoring threat from midfield and I know he will give us that."