"tough youth," 1902, first attested in nickname of U.S. outlaw George Cassidy (1866-?), probably an abbreviation of butcher (n.). Sense of "aggressive lesbian" is by 1940s. As an adjective by 1941.
Entries linking to butch
butcher n.
c. 1300, "one who slaughters animals for market," from Anglo-French boucher, from Old French bochier "butcher, executioner" (12c., Modern French boucher), probably literally "slaughterer of goats," from bouc "male goat," from Frankish *bukk or some other Germanic source (see buck (n.1)) or Celtic *bukkos "he-goat." Figurative sense of "brutal murderer, one who kills indiscriminately or cruelly" is attested from 1520s. Related: Butcherly. Old English had flæscmangere "butcher" ('flesh-monger').