Responding to former British minister Clare Short's allegation that listening devices had been planted in the offices of UN Secretary General Kofi Annan, Butler said he was certain he was bugged in his time at the United Nations.
"Of course I was, I was well aware of it," he told ABC radio on Friday.
"How did I know? Because those who did it would come to me and show me the recordings that they had made on others to help me do my job disarming Iraq.
"They would say 'we're just here to help you' and they would never show me any recordings they had made on me."
Butler, executive chairman of the UN Special Commission to Disarm Iraq from 1997 to 1999, told of diplomats going to great lengths to keep conversations under wraps because they believed the UN headquarters in New York was full of spies.
"If I really wanted to have a sensitive conversation with somebody... I was reduced to having to go either to a noisy cafeteria in the basement of the UN where there was so much noise around and then whisper, or literally take a walk in Central Park," he said.
Butler said he was bugged by the Americans, British, French and Russians.
"I knew it from other sources, I was utterly confident that I was bugged by at least four permanent members of the Security Council," he said.
Butler said the allegations of bugging in Annan's office showed international relations could be a dirty game.
"If I really wanted to have a sensitive conversation with somebody... I was reduced to having to go either to a noisy cafeteria in the basement of the UN where there was so much noise around and then whisper, or literally take a walk in Central Park"
Ex-UN chief weapons inspector
"If ordinary people knew how dishonest the game is they would mightily object," he said.
Meanwhile, the Australian Broadcasting Corporation reported that the country's intelligence officials had seen transcripts of mobile phone conversations involving Hans Blix, another former UN chief weapons inspector, that were supplied by either British or US intelligence services.
"Each time he entered Iraq his phone was targeted and recorded and the transcripts were then made available to the United States, Australia, Canada, the UK and also New Zealand," ABC journalist Andrew Fowler said, citing unnamed sources.
Prime Minister John Howard refused to comment, saying it was his policy to neither confirm nor deny intelligence matters.
The United Nations has said it would be "disappointed" if Short's allegations about Annan's office being bugged in the lead up to the Iraq war were true.