Butcher originally joined the club via the rookie draft for the 2012 season and spent two seasons on the Power's second-tier list.
But he struggled throughout that period with injury and only found consistent game time in the 2013 season with the Magpies.
Butcher was best on ground in Round 1 against Norwood and was prolific in several other matches, but also found himself playing in the reserves during the 2013 season.
The 20-year-old hails from Maffra in the Gippsland region of Victoria and is the younger brother of Power-listed forward John.
A classic Port Adelaide player, Butcher is a tough tackler who puts his head over the ball according to SANFL senior coach Garry Hocking.
"Danny knows a lot of the guys, and was a Magpies player last year so he'll be able to aid in integrating our SANFL and AFL listed guys next year," Hocking told portadelaidefc.com.au.
"He knows the way we want to play and he can provide leadership to younger guys who have also joined our League list.
"There's areas for him to work on, but he's 100% committed and we're very pleased he's agreed to stay next year."
portadelaidefc.com.au will reveal two more player signings over the weekend.