The win moves Town level on points with Birmingham with just one more game to play.
After contending with a burst football, it was the hosts who started the better and were ahead within five minutes, thanks to an unstoppable 25-yard drive from Carlos Edwards.
The Tractor Boys had the ball in the net twice more before the break, but on both occasions, Frank Nouble was denied by the assistant referee's flag.
Birmingham improved after half time and could have been level when Hayden Mullins found space in the box; however, the midfielder missed the target from eight yards out.
His miss was duly punished by the home side, when 10 minutes later, Daryl Murphy found space before firing the ball past Butland from the edge of the box.
Substitute Chris Burke managed a consolation goal for the visitors but it didn't matter as Ipswich secured their Championship status.