It was a bold move for Labor, which had previously faced an internal rift over the issue.
Mr Butler told colleagues he would lodge the push in a party room meeting, which follows similar moves in the United Kingdom, Canada and France to recognise the threat posed by global warming.
“The threat posed by climate change on the future prosperity and security of Australia and the globe constitutes a climate change emergency,” the defeated motion read.
It noted a warning over Australia’s rising emissions in recent years.
“Based on the latest scientific advice, the world is currently on track for warming of above 3 degrees and efforts to cut greenhouse gas emissions need to be strengthened."
Labor's push came as the opposition grapples with an internal debate over the party’s carbon emissions reduction policies.
Last week, Labor frontbencher Joel Fitzgibbon said the party should consider winding back its carbon emissions targets to match the Coalition.
His belief was that this would pressure the Morrison government to be held to account on its targets, rather than the opposition being vulnerable to scare campaigns. But it was rejected by Mr Butler.
Labor went into the last election with a 45 per cent emissions reduction target - more ambitious than the Coalition’s goal of a 26 to 28 per cent fall by 2030.
"There is a climate fight club going on over the other side," Prime Minister Scott Morrison said in Question Time.
"The thing they have forgotten about climate fight club is you are not supposed to talk about it."
'It's a climate emergency'
The Greens also attempted to stage a stunt highlighting climate change in Canberra on Tuesday - unveiling a hot air balloon branded with warnings.
But the plan to fly the hot air balloon over Parliament House was deflated with civil aviation authorities ruling this would breach airspace rules.
Mr Bandt said drought, unprecedented fires and damage to the Great Barrier reef showed the threat posed by global warming was already gripping the nation.
“The first step towards fixing a problem is admitting that you’ve got a problem.”
Independent Andrew Wilkie was among crossbenchers backing the declaration.
“It is simply undeniable that we are in the middle of a climate change emergency,” he said.
“How any country can refuse to accept the science … it’s simply beggars belief.”
Mr Wilkie said there was "pressure" on this generation of politicians to act on the science.
“If there is any members that do not support this motion … need to be called out for being denialists,” he said.
The Morrison government has defended its carbon emissions targets, saying the nation is on track to meet its commitments under the Kyoto and Paris agreements.
The Paris Agreement calls on countries to act to limit global warming to less than two degrees.
When asked about the matter in Question Time, Energy Minister Angus Taylor said the government has an "enviable" record on meeting and beating its targets.
"Whilst some in this place are keen on symbolism we are keen on real and meaningful action," he told Parliament.
"That's why we have strong targets as part of coordinated global action.
"All of this is focused on achieving our emission reduction obligations whilst we keep a strong economy."
Australia’s greenhouse gas emissions have risen year on year since a carbon pricing scheme was abolished five years ago - while the nation is responsible for around 1.3 per cent of global carbon emissions.
It is ranked 15th among the world's biggest emitting nations, while on a per capita basis its emissions (16.2 metric tonnes) are ranked only second behind Saudi Arabia (16.3 metric tonnes), and well ahead of the United States (15 metric tonnes) and China (6.4 metric tonnes).
The United Kingdom declared a national climate emergency in Parliament in May. France and Canada have also made the call, while more than 345,000 Australians have signed an e-petition to parliament demanding the climate emergency.