The District was established on November 27, 1920. The district was originally formed to deepen, enlarge, or clean out the channel of Butte Creek and other channels necessary to provide adequate drainage of irrigation and stormwater flows for the properties within its boundaries. The District is responsible for maintenance of the Smith Bridge and the Moulton Cut in the Butte Sink area to provide water to waterfowl hunters in exchange for accepting drainage water. The District provides services to approximately 276 agricultural and 45 single-family residential parcels for a total of approximately 47,852 acres.
The majority of Butte Creek Drainage District has been identified as a 100-year flood zone by the Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps. Additionally, mapping performed by the State of California Office of Emergency Services (OES) includes almost the entirety of the District in a number of dam failure inundation areas, including Oroville Dam, Paradise Lake and Magalia Reservoir. The District is located within the Butte Creek and Little Chico Creek Watersheds.