The out-of-contract midfielder, 22, signed a four-year deal with the Canaries on July 3 although a fee - required as Butterfield is under the age of 24 and had been offered fresh terms - could not be settled between the two clubs, making a tribunal almost inevitable.
Barnsley rejected an initial offer as derisory and furious manager Keith Hill accused the Barclays Premier League outfit of attempting to get their man on the cheap. But a statement from the Tykes on Friday morning revealed Norwich have upped their offer and common ground had been found.
"Barnsley Football Club have reached an agreement with Norwich City for the transfer fee of Jacob Butterfield," read the statement on the npower Championship club's official website.
"The club are now happy to have accepted a vastly improved offer from Norwich, subsequently avoiding a tribunal as the midfielder is under the age of 24."