Tete caught Butler with a crushing left uppercut midway through the eighth round and he failed to beat the referee???s count.
The classy Tete dominated proceedings, keeping his opponent at arm???s length with his jab in the opening three rounds.
Butler improved over the next two rounds but without causing any real problems for Tete, who in turn forced the Ellesmere Port fighter??to retreat on numerous occasions.
A left-right combo??in the sixth round offered some encouragement to the Liverpool crowd but again Butler was unable to follow it up with any further telling blows.
That was as good as it got for the 26-year-old who was pegged back in the seventh round before being downed in the eighth as his unbeaten run ended to leave his record at 17-1.
There was some positive news for a Merseyside fighter earlier in the night though, as Derry Mathews warmed up for his WBA World Lightweight Title shot against champion Richar Abril in the same venue on April 18 with victory against Gyorgy Mezei.
Mathews landed a powerful right in the fifth round that his Hungarian opponent failed to get up from to boost his confidence ahead of his title tilt.
???I knew what was at stake when I took this fight against Mezei after Abril pulled out and I had to get the KO win,” said Mathews.
“I did that tonight and now I???m ready for Abril next month.?? I???m fighting one of the best in the division in my hometown in front of my home fans.
“If that doesn???t get me motivated to win the world title, nothing will.?? I can???t wait for it next month, it???s going to be massive in the city.???