The 30-year-old spent four years at the West Midlands club before joining the Blades in the summer, but was allowed to return on loan this season to remain match fit.
Saddlers manager Dean Smith is quoted by BBC Sport as saying: "We're just waiting on a response from Sheffield United now.
"It has been great to have him back here. We've asked to keep him for a second month, to help us out, but we're in their hands."
Butler has twice been voted Walsall's Player of the Season and has scored 14 times in 172 appearances for the Midlanders.